CANADA: Analysts Unsure CPI Would Impact BOC Decision (3/3)
Sep-15 19:24
Some analyst expectations for the August inflation report. While analysts aren't convinced that the report will have much bearing on the BOC decision on Wednesday, due in large part to the fact that the rate deliberations will have all but concluded by Tuesday, a few have noted that there may be an impact if there is a significant surprise.
- BofA - "expect downside pressure from transportation (gasoline) inflation and from household operations, furnishings & equipment".
- BMO: " In recent days, pump prices have somehow climbed above year-ago levels nationally, even with the consumer carbon tax having been axed and world oil prices down about 10% y/y. While the Bank typically looks past swings in gasoline, it’s no help to inflation expectations with pump prices suddenly flaring for no obvious reason."
- CIBC: "Inflation likely heated up slightly in August, albeit not by enough to prevent the Bank of Canada restarting interest rate cuts the next day. The expected acceleration in headline inflation, to 1.9% y/y from 1.7%, will be driven largely by base effects, with the 0.0% monthly reading (0.2% SA) looking very unthreatening. Rent inflation is expected to decelerate, bringing the series a little more in line with figures showing declining asking rents. However, air transportation inflation could look stronger, as prices return closer to seasonal norms following a summer that saw more staycations rather than vacations. Core measures of prices (CPI-X, Trim and Median) are expected to post 0.2% m/m increases, which will keep their year-over-year rates broadly stable."
- Desjardins - "the removal of most counter-tariffs this month has reduced the upside risks to inflation. Barring any major surprises in the August CPI data, we expect the Bank of Canada to cut rates the following day."
- RBC: " Year-over-year CPI growth is still being biased lower by a drop in energy prices, in large part due to the removal of the consumer carbon tax from gasoline prices in most provinces in April. But, we expect headline price growth to tick up to 2.1% from 1.7% in July, and for price growth, excluding food and energy products, to rise to 2.8%. The BoC’s own preferred median and trim core CPI measures are expected to have held around 3% (the top end of the central bank’s inflation target), extending the trend seen over the summer."
- Scotia - "In terms of the NSA reading, August is typically a month in which there is low average seasonality in price swings. Gasoline prices may contribute up to 0.1% to CPI given an estimated 1½% m/m NSA rise. Food is likely to be a minimal influence. Shelter is estimated to be up to a 0.1% addition. There is high uncertainty around much of the rest of the basket...Some shops are holding off on their rate calls until seeing CPI. We feel we have enough information to merit not waiting as data dependency shifts down the list of considerations relative to the forward-looking considerations explained in the Bank of Canada section of this report."
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AUSSIE 10-YEAR TECHS: (U5) Follows Fade in Treasuries
Aug-15 22:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 15:17 BST Aug 15
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed both the recent poor NFP print as well as Tuesday’s inflation number. While this impact faded into the close of the week, 10-year futures remain toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
FOREX: USD Index Pinned to 50-dma as Putin Shakes Hands with Trump
Aug-15 20:49
- USD slipped against all others Friday, with a poor set of retail sales and Uni of Michigan sentiment numbers meeting a higher-than-expected import price index to further stimulate concerns over a stagflarionary phase in the US economy. The USD Index trades either side of the 50-dma which, notably, has begun to flatten out after maintaining a solid downtrend throughout 2025.
- JPY is the strongest currency in G10, extending the breakout and bearish conclusion of the consolidation phase in USD/JPY. Recent weakness puts the price through support drawn off the early August lows as well as 146.71, a key retracement. Price action this week marks a full reversal of the previously overbought condition, keeping the downside argument in focus.
- Anticipation ahead of the Putin-Trump meeting has reached fever pitch. Footage showing the Presidents shaking hands in Alaska has helped ease concerns over a hostile meeting, but it's the outcomes that will matter to markets - particularly as equities hold at alltime highs. Any signs of progress toward a ceasefire would be warmly received by risk sentiment - although both Trump and Putin cautioned against a optimistic outcome in comments to press.
- We noted earlier in the week the pressure building on USD/HKD, with price action not matching the pattern of HKMA intervention. That move extended overnight, and is still building at typing, putting spot down to new pullback lows of 7.8119 shortly after the European open. Overnight swap rates have surged further still Friday (hitting 1.7% at typing), well ahead of the 0.3% prevailing rate mid-week and should continue to support a recovery in HIBOR fixes ahead. Today's 1m HIBOR fixed higher by 41bps, hitting 1.45% for the highest fix since mid-May. It's these factors that should work against the HKD carry trade (selling HKD, buying USD), evident in the further tightening of the HKD forward discount today: down 975 points from as high as 1270 this month.
- Focus in the coming week shifts to Jackson Hole and Powell's comments on Friday. With the September meeting still in flux - any conviction toward tipping the board toward a rate cut at the next FOMC will be carefully watched, but it's a hawkish outturn that could be more consequential for markets, as OIS prices a near 90% chance of easing on September 17th.
MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
Aug-15 20:00
- MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
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