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Jul-23 19:55

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CANADA: May CPI Preview: BOC Eyeing "Recent Firmness" Carefully (1/3)

Jun-23 19:52

On Tuesday morning (0830ET) we get the first of two monthly CPI readings ahead of the next BOC decision on July 30. 

  • Consensus for the Y/Y headline reading is 1.7%, with a slight upward skew (similar to April's 1.74% unrounded figure), while the non-seasonally adjusted M/M consensus is 0.5% (MNI Median; BBG survey is same and average indicates a slight downward skew at 0.48%) after -0.1% in April.
  • Meanwhile the average of the BOC's preferred trim and median core measures is seen coming in at 3.0% Y/Y (3.15% unrounded in April), the highest in over a year.
  • While as noted there is another CPI report to come before the July BOC decision, another upside surprise in core measures could see a retracement of recent cut repricing (last 10bp, vs 6bp last week), with analysts remaining split on July easing expectations.
  • The deliberations of the June meeting reported “If the recent firmness in underlying inflation were to persist, it would be more difficult to cut the policy rate".
  • A reading in line with consensus would keep the door open to a cut amid a pullback in the 3mma annualized rate in trim/median average to 3.1/3.2% from 3.4% prior.
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AUDUSD TECHS: Trades Through The 50-Day EMA

Jun-23 19:30
  • RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
  • RES 3: 0.6688 High Nov 7 ‘24
  • RES 2: 0.6603 High Nov 11 ‘24
  • RES 1: 0.6479/6552 20-day EMA / High June 16 and the bull trigger
  • PRICE: 0.6428 @ 15:46 BST Jun 23
  • SUP 1: 0.6373 Low Jun 23
  • SUP 2: 0.6357 Low May 12    
  • SUP 3: 0.6309 38.2% retracement of the Apr 9 - Jun 16 bull cycle
  • SUP 4: 0.6275 Low Apr 14

The medium-term trend set-up in AUDUSD is unchanged, the outlook remains bullish. However, a corrective cycle is in play and this has resulted in a break of support around the 50-day EMA, at 0.6435. A clear break of this average would signal scope to a deeper correction and open 0.6357, the May 12 low. Clearance of this support would highlight a stronger reversal. Initial resistance to watch is 0.6479, the 20-day EMA.  

US TSYS: Tsys Bid With Stocks, Not the Reaction You Were Expecting

Jun-23 19:26
  • Treasuries looked to finish higher Monday (TYU5 +11.5 at 111-11), curves bull steepening (2s10s +2.645 at 49.176) as rates & stocks rallied on initially muted response by Iran to US bombing over the weekend.
  • Stocks extended gains even after Iran launched missiles at US base in Qatar, possible face saving measure as Iran warned US prior, most if not all missiles intercepted.
  • Risk gained traction on dovish comments on potential rate cuts from Fed VC Bowman and Chicago Fed Goolsbee if inflation remains muted.
  • Projected rate cut pricing gains traction vs. this morning's levels (*), Dec at the highest since May 12: Jul'25 at -5.9bp (-3.6bp), Sep'25 at -25.2bp (-19.5bp), Oct'25 at -32.6bp (-40.7bp), Dec'25 at -58.8bp (-49.9bp).
  • Existing home sales unexpectedly ticked up in May to a 4.03M seasonally-adjusted annual pace, from 4.00M in April (and vs 3.95M survey).
  • Flash S&P manufacturing PMI held steady at 52.0 for a second month (cons 51.0) after 50.2 in both March and April whilst services dipped to 53.1 (cons 53.0) after 53.7 in May.