FOREX: CAD Consolidating Post-Employment Gains Ahead of BOC
Dec-10 13:17
- The Canadian dollar rallied impressively on Friday following the stellar employment report for November. The data built on two similarly impressive prior jobs report, combining with a Q3 GDP print that showed the economy rebounding much faster than expected.
- The Bank of Canada’s easing cycle looks to be at an end, with markets overwhelmingly expecting a rate hold today and through the subsequent 4 meetings to mid-2026. The firmer-than-expected macro data has fuelled speculation that the BOC’s next move will be a hike and not a cut, with a 25bp increase fully priced by Q4 2026. Our preview of the meeting is here: https://mni.marketnews.com/3MzqWaM
- We have noted that technical developments have really boosted the bearish outlook for USDCAD. Resistance at the top of the bull channel held very well in early November, drawn from the July 23 low, and subsequently, the breach of the bull channel base has exacerbated downside momentum.
- Most recent weakness below the October low at 1.3888 has also bolstered the bearish narrative, prompting a test of the 1.3800 mark on Monday. Spot has subsequently been oscillating around 1.3850 as we approach both the BOC and FOMC decisions later today. 1.3769 (retracement point) and 1.3727 (Sep17 low) are the next chart points in focus.
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BONDS: Recovery Rally Stalls
Nov-10 13:11
The recovery rally in Bund & gilt futures has stalled after the opening gaps lower were filled and crude oil futures based following a move away from session highs.
- Tsys still the underperformer amongst core global FI markets given optimism surrounding the potential end of the U.S. government shutdown. Tsy spreads vs. Bunds 2.5-3.0bp wider across the curve.
- Peripherals and semi-core EGBs remain tighter vs. Bunds given the more constructive risk backdrop.
STIR: Repo Reference Rates
Nov-10 13:03
- Secured Overnight Financing Rate (SOFR): 3.93% (+0.01), volume: $3.069T
- Broad General Collateral Rate (BGCR): 3.89% (+0.00), volume: $1.216T
- Tri-Party General Collateral Rate (TCR): 3.89% (+0.00), volume: $1.192T
- (rate, volume levels reflect prior session)
BONDS: Societe Generale Recommend Underweights In OLOs
Nov-10 13:01
he extension of Belgian Budget discussions and questions over the PM’s future dove OLO underperformance vs. semi-core EGB peers last week, reintroducing another area of medium-term fiscal risk to the fore in the Eurozone.
- Societe Generale note that while they were “cautious on Belgium, we turned tactically long vs. OATs during periods of political instability in France”.
- The ongoing Belgian Budget deadlock means that they remain cautious “despite no OLO supply being expected before year-end (except for two ORIs) and the seasonal tightening pattern in November”.
- As a result, Societe Generale prefer longs in RAGBs, RFGBs, or DSLs vs OLOs, particularly in 10s.
