TURKEY: CBRT Highlight Exchange Rate Impact on Core Goods Prices

Asked about how the economy is playing out relative to the two forecast scenarios in the April MPR, Gov Macklem says: 

• "We're somewhere between the two scenarios, but it's still a moving target. And you know, we'll we'll have to see where things go....since April, the likelihood of scenario two, which is a pretty extreme, protracted, severe trade war - the likelihood of that does appear to have come down somewhat... I hope the situation becomes clear and we can go back to a more usual forecast, or at least a central scenario with with some some risks, but that's really going to depend on on how things play out."
• A little more commentary than usual on CAD in the BOC press conference. Macklem says re FX impact on goods imports inflation: "some of that [previous] depreciation may also be coming through the goods prices we're seeing now, because it takes some time for that to get passed through. As [Deputy Gov Rogers] suggested, that's now going to - if the assuming the dollar stays 70 to 73 cents - that'll start to work in the other direction."
• Asked if consistent uncertainty tilts the BOC toward a rate cut, Macklem says: "when the Governing Council deliberated about the future path for interest rates on balance, different members had somewhat different perspectives. It's not surprising, particularly given the uncertainty, there's going to be some diversity of views about how things are going to play out and what that means. But on balance, Governing Council thought that if this uncertainty continued, if US tariffs continued, and that continued to weaken the Canadian economy, and if the cost pressures coming through on inflation were contained, yeah, there could be a need for a further reduction in our policy interest rate."

Gilts have taken cues from Tsys over the course of the afternoon, with the mix of soft U.S. labour market data and a stagflationary ISM services survey providing a bid.

• Futures trade as high as 92.02 after basing at 91.44.
• The recent gains in the contract have allowed short-term oversold conditions to unwind, with the uptick considered corrective from a technical perspective.
• Initial support and resistance located at 91.16/92.11.
• Yields 1.5-4.5bp lower, curve flatter.
• 10s stick in the wide 4.40-4.80% range that has been in play since mid-January.
• The benchmark remains within the wedge drawn off the longer-term uptrend (beginning at the December ’21 lows) and the short run downtrend drawn off the ’25 high. It last trades at 4.61%, with the boundaries of the wedge located at 4.500% & 4.788% today.
• TD Securities note that “there is certainly lack of conviction for duration”. However, they also “believe that there is a lot of focus from the global officials on the ongoing steepening move in curves”. Ultimately, TD still “favour a long bias in outright yields and ASWs rather than curve per se”. Their “near-term conviction call is for 30-Year yields to move closer to 5.00%”.
• 2s10s set for first sub-60bp close since early April.
• 5s30s continues to threaten the first break below 120bp over the same horizon.
• SONIA futures off lows, but in relatively tight ranges, -2.0 to +0.5.
• BoE-dated OIS shows ~40bp of cuts through year-end, little changed on the day.
• The latest BoE DMP survey headlines Thursday’s UK calendar.
• Comments from BoE’s Breeden & Greene also due tomorrow, both have spoken since the May MPC.

You are invited to listen to a Livestreamed MNI Connect Video Conference with the San Francisco Fed President Mary Daly.

Details below:

• Mary Daly joins us to discuss the ‘The US Economic Outlook and Challenges for Policymakers'
• DATE: Thursday, 10 July 2025
• TIME: 2:30 pm - 4 pm ET; 11:30am - 1pm PT; 7:30pm - 9pm London
• This event will be run as a Zoom Webinar and is a public, on-the-record event.

To register please go to: MNI Webcast Registration