BOC: RBC No Longer Sees Further BOC Cuts With Growth Staying Resilient
RBC's latest quarterly projections update sees the Bank of Canada's easing cycle at an end, versus their prior forecast of 50bp of further reductions in the overnight rate to 2.25%. They write that "while Canada’s economic path forward remains challenging, it appears considerably less treacherous than it did just a few months ago", citing a majority of Canadian exports being exempt from US tariffs, "hard" data holding up better than sentiment readings, US economic resilience, and fiscal capacity.
- They've upped their real GDP growth forecast for 2025 to 1.6%, and 2026 to 1.3%. (was 1.5% / 1.0% a month ago).
- Another potential "upside risk" factor is the BOC's room to cut rates further if needed: "should the BoC want or need to respond further, it has flexibility in the inflation data to do so....We []expect limited impact from Canada’s retaliatory import tariffs on inflation, and that means monetary policy will remain flexible to act as a traditional buffer for the economy. The central bank will need to take into account potential additional support that could come from government spending, but, overall, it has the room to cut interest rates further if it needs to."
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US TSY FUTURES: BLOCK: Jun'25 2Y Buy
- +7,400 TUM5 103-07.5, buy through 103-07.38 post time offer at 1328:57ET, DV01 $270,000.
- The 2Y contract trades 103-07.62 last (-1.62).
US STOCKS: Stocks Retreating
Nasdaq still mildly higher/off early morning levels - Communication Services & IT still leading gainers, Health Care - pharmaceuticals underperforming. No obvious headline driver here - more likely profit taking after levels climbed to the highest levels since prior Apr 2 Liberation day/tariff annc., position squaring ahead of Thursday's data.
- DJIA down 147.92 points (-0.35%) at 42143.74
- S&P E-Mini Future down 6.5 points (-0.11%) at 5914.25
- Nasdaq up 62.8 points (0.3%) at 19130.52
GBPUSD TECHS: Bullish Engulfing Candle
- RES 4: 1.3550 High Feb 24 ‘22
- RES 3: 1.3510 1.236 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 2: 1.3402/3444 High May 6 / High Apr 28 / 29 and the bull trigger
- RES 1: 1.3323 High May 9
- PRICE: 1.3304 @ 15:46 BST May 14
- SUP 1: 1.3140 Low May 12
- SUP 2: 1.3095 50-day EMA
- SUP 3: 1.3041 Low Apr 14
- SUP 4: 1.2968 Low Apr 11
Recent weakness in GBPUSD is considered corrective. Tuesday’s gains highlight a possible reversal pattern - a bullish engulfing candle. If correct, the pattern signals the end of the corrective cycle. Key support to watch is 1.3095, the 50-day EMA. A continuation higher would refocus attention on the key resistance and bull trigger, at 1.3444, the Apr 28 / 29 high. A break of this level would resume the uptrend.
