STIR: SOFR Futures Update: Year-End Hike Projection Gains Traction
Aug-11 18:08
- Mirroring steeper Tsy futures, Secured Overnight Financing Rate 3M futures are moving lower/extending lows in the last few minutes.
- Front month Sep'23 SOFR futures are currently trading -0.010 at 94.60 (3M SOFR settled -0.00458 to 5.36457 (-0.00601/wk)). The balance of Whites (SFRZ3-SFRM4) -0.025 to -0.065, Reds through Golds (SFRU4-SFRM8) -0.090 to -0.135 with Greens underperforming.
- Rate hike projections through year end are gaining traction again, Sep 20 FOMC is 11% w/ implied rate change of +2.7bp to 5.356%. November cumulative of +9.1bp at 5.42, December cumulative of 6.7bp at 5.396%. Fed terminal slips to 5.42% in Nov'23.
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EURGBP TECHS: Clears Key Support
Jul-12 18:00
- RES 4: 0.8749 50.0% retracement of the Feb 3 - Jun 19 downleg
- RES 3: 0.8719 High May 23
- RES 2: 0.8625/58 50-day EMA / High Jun 28 and bull trigger
- RES 1: 0.8573/84 20-day EMA / High Jul 10
- PRICE: 0.8560 @ 17:01 BST Jul 12
- SUP 1: 0.8504 Low Jul 11
- SUP 2: 0.8484 1.0% 10-dma envelope
- SUP 3: 0.8454 76.4% retracement of the Mar - Sep 2022 bull cycle
- SUP 4: 0.8408 Low Aug 24 2022
The primary trend direction in EURGBP is unchanged and remains down despite Wednesday’s rally. Tuesday’s sell-off resulted in a break of support at 0.8518, the Jun 19 low. The break confirms a resumption of the downtrend and signals scope for a continuation. Moving average studies are in bear-mode position, highlighting current trend conditions. The focus is on 0.8454, a Fibonacci retracement point. Initial firm resistance has been defined at 0.8584, the Jul 10 high.
CANADA: Local Analysts On BoC [2/2]
Jul-12 17:54
Desjardins, RBC and TD imply base case for rates on hold but with risks of moving higher
- Desjardins: We see this as the peak for rates in this cycle. Today’s US inflation data provides evidence that global inflationary pressures are dissipating. Furthermore, as we’ve pointed out before, the BoC’s balance sheet is set to shrink materially in the months to come, with a large amount of bonds maturing and rolling off. That should obviate the need for another rate hike in September by further tightening financial conditions.
- RBC: Our own outlook is a more pessimistic one than the central bank's. That should be enough to push the BoC back on the sidelines with no additional interest rate increases this year. But they are clearly willing to hike again at the next decision in September if inflation in particular doesn't show further signs of easing.
- TD: The onus is on the incoming data, which we think will show enough weakness over the coming months for policymakers to remain on hold for the next few quarters. Should household spending prove more resilient than policymakers anticipate, this would offer a pathway to further rate increases.
CANADA: Local Analysts On BoC [1/2]
Jul-12 17:53
BMO and CIBC have differing reactions with the timing of their projected start of rate cuts.
- BMO: Today's move can be characterized as a moderately hawkish hike, in that the BoC is certainly not closing the door on the possibility of further moves. While we are not looking for further hikes this year, we are tweaking our rate call in light of the Bank's view on growth and inflation—we now see rate cuts beginning only in 2Q24, one quarter later than our prior view.
- CIBC: Underperformance of the BoC’s forecasts may not come soon enough to prevent another 25bp hike at the September meeting, which given the tone today now seems likely. These recent interest rate hikes may ultimately, however, prove to be more than is needed to bring inflation back down to target, and as a result we have pulled forward our expectation for the first rate cut in 2024 slightly to April, from June previously.
