BOC: MNI BoC Review-June 2025: Proceeding Carefully
Jun-04 20:06
We've published our review of the June Bank of Canada meeting - Full Report Here
- The Bank of Canada held rates in June for the second consecutive meeting at 2.75%, in line with the MNI Markets Team’s expectation and the broad consensus, though defying some market and analyst expectations for a cut.
- There was a very slight shift in implied market pricing for further 2025 BOC cuts after the decision, but basically unchanged despite the decent implied probability of a cut.
- Cumulative pricing through the July meeting points to 13bp of cuts through that point (2.61% implied OIS rate, vs 2.59% just before the decision). September retains the first full cumulative cut pricing (2.50%, roughly unchanged vs pre-decision), with end-year rates at 2.37% (unch vs pre-decision).
- Indeed pricing through end-2025 did not really shift much through either the decision or the press conference, with the BOC reinforcing the message that it was less forward-looking than usual in setting policy given elevated uncertainty amid the US-Canada trade conflict. As such, the policy statement notes that Governing Council is “proceeding carefully”.
- The communications leaned slightly hawkish, keeping the door open to a cut but not emphatically.
- The data simply didn’t make a compelling enough case to cut rates, with "firmness in recent inflation data" (Gov Macklem would later note firm core CPI for April “has got our attention”) and "softer but not sharply weaker" economic activity.
- Mirroring the limited movement in market rates, we didn’t see any changes in analysts’ outlooks for the rest of the easing cycle. Most analysts expect either one or two 25bp cuts ahead, with the next meeting on July 30 being very much “live” and accompanied by what BOC leadership hopes will be a conventional central forecast instead of scenario-based, as the tariff picture becomes clearer.
- A cut at that point remains a 50/50 proposition per market pricing. As Macklem acknowledged, they will be looking at two inflation reports between now and then (Jun 24 and Jul 15); they will also get one GDP report (Jun 27, for April / prelim May), and a quarterly Business Outlook report (Jul 21). The first port of call is Friday’s employment report for May, with a second to come on Jul 11.
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USDCAD TECHS: New Cycle Low
May-05 20:00
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4076 50-day EMA
- RES 1: 1.3923 20-day EMA
- PRICE: 1.3821 @ 15:09 BST May 5
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend needle in USDCAD continues to point south. A fresh cycle low on Friday reinforces the bearish theme signalling scope for a continuation, near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3923, the 20-day EMA.
US TSYS: Focus Remains on Midweek FOMC, ISM Service 2Y Highs
May-05 19:32
- Treasuries look to finish lower Monday, off late session lows as rates bounced in reaction to reversal in stocks that had been climbing steadily off early session lows.
- Generally quiet session on lighter volumes (TYM5 <1M) with multiple Spring holidays around the globe: Japan, China, HK, South Korea, as well as the UK, EU is open however.
- Focus on Wednesday's FOMC rate annc at 1400ET. The FOMC is expected to extend its series of rate holds to a third meeting in May, keeping the Fed funds target rate at 4.25-4.50% while maintaining its forward guidance in the Statement.
- Treasury futures gap lower after higher than expected ISM Services data - climbing to the highest levels since January 2023 (51.6 from 50.8 vs 50.2 est; Employment Index 49.0 Vs Mar 46.2; New Orders Index 52.3 Vs Mar 50.4; Prices Index 65.1 Vs Mar 60.9.
- Jun'25 10Y currently -3 at 111-00 vs. 110-28.5 low (10Y yld at 4.3394%), through technical support at 110-30.5 (50-day EMA). A clear breach of this average would strengthen a bearish threat and expose 110-16+, the Apr 22 low.
- Cross asset: Still weaker BBG US$ index bounces to 1221.48 (-3.03); stocks weaker after paring losses all day: S&P eminis -20.5 at 5688.5.
AUDUSD TECHS: Northbound
May-05 19:30
- RES 4: 0.5682 High Nov 12 ‘24
- RES 3: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 2: 0.6528 High Nov 29 ‘24
- RES 1: 0.6494 High May 05
- PRICE: 0.6480 @ 15:08 BST May 5
- SUP 1: 0.6356/6321 20- and 50-day EMA values
- SUP 2: 0.6275 Low Apr 14
- SUP 3: 0.6181 Low Apr 11
- SUP 4: 0.6116 Low Apr 10
AUDUSD traded higher Monday as the pair starts the week on a bullish note. The breach of 0.6450, the Apr 29 high, marks the end of the recent pause in the bull cycle and confirms a resumption of the uptrend. Note that moving average studies are in a bull-mode position, highlighting an uptrend. Sights are on 0.6528, the Nov 29 ‘24 high. Initial key support to monitor is 0.6321, the 50-day EMA.
