US DATA: NY Area Services Activity Still Negative, But Picking Up

• Canada's population fell 76,068 or 0.2% in Q3 to 41,575,585, StatsCan said Wed in a preliminary estimate.
• By comparison the population in Q3 2023 grew the fastest since 1957 at +1%, and by +0.6% in Q3 2024.
• Fall led by non-permanent residents -176,479, mainly those on work and student permits. They now represent 6.8% of Canada's population, a share the govt has said is too high.
• Swings in population have pressured housing costs and made it more difficult to assess slack in the economy and job market. Unemployment has declined in recent months as hiring advanced while labor force declined.

The dovish repricing that followed this morning’s soft UK CPI data has pulled GBP 1y1y swaps further away from the upper boundary of the wedge structure that has formed (see chart below).

• The recent round of hawkish BoE repricing generated a false break above the upper boundary of the wedge early last week.
• Looking forwards, the pricing of a deeper BoE easing cycle is the most likely driver of any extension beyond the base of the wedge.
• Terminal rate pricing of 3.30% has provided a bit of a limitation for terminal rate pricing in recent weeks, but the soft CPI data does increase odds of a potential dovish departure from the market expectation of a 5-4 vote split to deliver a rate cut at tomorrow’s BoE decision.
• This morning’s CPI release may also make the rhetoric that accompanies the decision sound a little more dovish than it otherwise would have been.

Fig. 1: GBP 1y1y (%)

Source: MNI - Market News/Bloomberg Finance L.P.

• Despite the current 0.63% recovery for the dollar index from yesterday’s post-NFP lows, USDCAD has relatively underperformed with just a 0.38% rise. Oil prices may be providing a moderate CAD boost here, after President Trump ordered a complete blockade of all sanctioned oil tankers entering and leaving Venezuela while additional sanctions have been threatened against Russia.
• For USDCAD, yesterday’s dip following the US jobs data essentially matched the first primary target for the selloff, trading to within 3 pips of the September lows at 1.3727. Subsequently, price has been consolidating below the 1.38 mark, keeping short-term bearish trend conditions in place following the technical breakdown earlier in the month.
• Further weakness would encounter trendline support just above the 1.37 handle, while 1.3682 (76.4% retracement of the Jun 16 - Nov 6 bull cycle) and 1.3576 (Jul 23 low) represent the next supports. Lows for the year come reside at 1.3540.
• Following tomorrow’s US inflation figures, domestic retail sales data for October is scheduled Friday, before next week’s October GDP release. As a reminder, within the last stellar GDP report from Canada, a contraction in October's flash reading suggests weakness ahead.
• Coming out of last week’s BOC meeting, markets price in ~25bp of cumulative hikes through the October 2026 meeting, with the path through H1 2026 almost completely flat.