BOC: Macklem: "Material" Change In Outlook Needs "Accumulation Of Evidence"
MNI's Greg Quinn asks about how the BOC currently views the Canadian dollar's role as an economic shock absorber:
- Deputy Gov Rogers responds: "We don't target the Canadian dollar. We put a number in as part of our forecast. I mean, in the type of shock we're dealing with, a trade shock, the Canadian dollar is a key factor. It's a key input to how we think about what's going on in the economy. It's still playing its shock absorber role. I mean, the things that are moving the Canadian dollar are the same things that always do. So there's the price of oil, there's expectations around monetary policy, and then there's just sort of the sentiment around global risk. Some of those correlations have been a bit less tight than they've been historically, but basically, the Canadian dollar is behaving the way it usually does, in the way it's meant to, inside of our monetary policy framework. So not much more to say than that."
Asked what constitutes a "material change" in the outlook that would warrant a BOC policy response, Macklem says that one of the advantages in returning to a base-case outlook in the MPR is that they can assess incoming data relative to that outlook and adjust policy accordingly if necessary.
- "What do I mean by material? You know, it's not one month of data that shows some shift you need to see. You need to see some accumulation of evidence that you're coming in below that forecast, or above that forecast, enough that it actually changes your outlook of the future. If something comes up a little above, but we think it's just going to come back roughly to the forecast, that's not a material change. But if the outlook really changes, yes, you know, we're certainly prepared to respond. I hope our message is fairly clear today that, with this cut and based on this outlook, we think the current policy rate is about right. But you know, we recognize there's a lot of uncertainty out there."
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US: Jeffries And White House Dig In Ahead Of Trump Govt Shutdown Meeting
House Minority Leader Hakeem Jeffries (D-NY) implied to reporters, ahead of a crucial (15:00ET) White House meeting with Senate Minority Leader Chuck Schumer (D-NY), President Donald Trump and Republican leaders, that Democrats will not support the House-passed 'clean' Continuing Resolution, even if Trump and Republicans offer concessions on Affordable Care Act (Obamacare) subsidies.
- Jeffries: “Our position ... is a permanent extension of the Affordable Care Act tax credits. enough with the games that Republicans have been playing.”
- Jeffries added, “Republicans know they don’t have the high ground. They have a weak position… If the government shuts down, it’s because Republicans want to shut the government down.”
- Jeffries left the door open to negotiations, “We are willing to find a bipartisan path forward. It has to help everyday Americans. Not hurt everyday Americans… What we will not do is support a partisan Republican spending bill.”
- White House Press Secretary Karoline Leavitt told Fox News a short time ago, “The leverage is in the president's hands because the overwhelming majority of the American public wants to keep the government open. I mean, it's not even close.”
- Jeffries's comments are consistent with a hardline position from House Democrats throughout the funding process. Any Democrat concession will ultimately have to come from Schumer, whose votes will determine if the government stays open on October 1. If Trump offers any concessions on Obamacare, we expect Schumer to make a deal both sides can tout as a win.
OPTIONS: Expiries for Sep30 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1600-05(E2.4bln), $1.1695-00(E1.8bln), $1.1725(E528mln), $1.1775(E715mln), $1.1800(E1.8bln), $1.1825-30(E850mln), $1.1850(E878mln)
- USD/JPY: Y148.00($827mln), Y149.00-15($755mln)
- AUD/USD: $0.6595-00(A$1.3bln)
- NZD/USD: $0.5785(N$1.0bln)
SOFR OPTIONS: Midmorning Option Update
Underlying futures remain higher/near highs as focus turns to US Gov shutdown (Tuesday at midnight if funding deal not reached), curves flatter. Projected rate cut pricing gaining slightly vs. late Friday levels (*): Oct'25 at -22.7bp (-22.4bp), Dec'25 at -41.2bp (-40.5bp), Jan'26 at -50.7bp (-49.9bp), Mar'26 at -60.6bp (-59.9bp).
- +10,000 SFRH6 96.50/96.68/96.87/97.06 call condors, 3.75
- +5,000 SFRZ5 96.56/96.68 call spds 0.75 ref 96.275
- +3,500 SFRZ5 97.50/98.00 call spds .25 ref 96.295
- Update, 26,000 SFRZ5 95.87 puts, cab (huge open interest at 603,823 coming into the session)
