US DATA: Domestic Demand Continues To Underpin Solid Growth

• BoC-dated OIS may have shifted from 36bp to 33bp of cuts priced for the Dec 11 BoC decision after a stronger than expected CPI report but initial analyst takes show an unwillingness to shift from either 25bp or 50bp cut camps.
• Major releases still to come: GDP for Q3/Oct advance (Nov 29) and jobs report for Nov (Dec 6). 

25bp cut in Dec

• BMO (unch): “We have been in the 25 bp camp from the start and this report only reinforces that expectation, along with evidence that housing is stirring, the Fed will turn more cautious, and a limping loonie. There are still the important Q3 GDP (next Friday) and jobs reports (following Friday) ahead of the next rate decision on December 11, but we are expecting big upward revisions to GDP, suggesting we'll need to see a truly tough jobs report to prompt another aggressive cut. At this point, most signs suggest the prudent course of action is a 25 bp rate cut path.”
• Desjardins (unch): "As a result of the upside surprise, which suggests a tad more stickiness in inflation than expected, we have more conviction in our call that the BoC will cut rates just 25bps in December. We expect market participants and economists who had been expecting a second consecutive 50 bp to migrate to the quarter-point camp."

50bp cut in Dec

• RBC (unch): “The minutes from the BoC’s last policy decision (50 bp cut to the overnight rate in October) noted that there could be “ups and downs” with inflation. With continuing softness in labor markets, evidenced by declining job openings and rising unemployment, we still expect price growth will drift broadly lower. The BoC is data dependent, and will see another labour market report before the next interest rate decision in December. Our base-case assumes an additional 50 bp cut to the overnight rate by the BoC in December.”
• TDS (unch): “This report will put the BoC into a tricky position for the December rate decision; with headline inflation still tracking below BoC projections and excess supply to weigh on underlying measures into 2025, we do not think today's report takes another 50bp cut off the table (even if it complicates it somewhat). But market pricing can prove more fickle, especially with uncertainty over the Fed's next move. We do not think the BoC will be impacted by Fed uncertainty, and continue to look for the BoC to cut by another 50bps in December.”

Riksbank communication at the November meeting suggested that recent SEK shouldn’t stand in the way of an additional 25bp cut in December. Inflation remains consistent with the 2% target and policy easing is required to support the real economy. 

• However, further weakness may increase speculation for a cautionary pause at the January 2025 interim meeting, before resuming rate cuts in March.
• The November meeting minutes highlighted differing views around the recent depreciation of the krona amongst the Executive Board. Deputy Governor Bunge preferred to take a "longer time horizon" view, while Jansson appeared more worried.
• SEK weakened in tandem with risk assets on this morning’s Russia/Ukraine war escalation, but has since recovered over half of its losses against the USD.
• Trendline resistance drawn from the September 2022 high capped upside in USDSEK, but the pair remains almost 10% above the September low. A pullback through the 20-day EMA at 10.7681 is required to cancel the recent bullish theme, while shallower sell-offs will be considered corrective.