CANADA: Some Analysts See April Pause After CPI But Not Yet Consensus [1/2]
Mar-19 12:27
Yesterday’s strong CPI report helped further trim BoC cut expectations, with ~7bp of cuts priced for the Apr 16 decision. Some analysts now formally call for an April pause but others wait for the April 2 tariff announcements.
Calling for an April pause:
- Desjardins: “When combined with the recent increase in consumer inflation expectations, we think this is likely to convince the Bank to pause its rate cutting cycle in April, at least temporarily. However, the BoC will have a lot more to contend with on the inflation front as the year continues […] we’re not convinced that the Bank of Canada is done cutting rates just yet.”
- GS: “Given [CPI] data and recently firmer activity data, we revise our forecast for the BoC's April meeting to a hold (vs. a cut previously) but continue to expect a final cut in June for a 2.5% terminal rate (vs. 2.25% previously). We continue to see moderate dovish risks if trade tensions escalate more than we expect.”
- Scotia: “Core inflation has yet to show a convincing pattern of lagging disinflation to the emergence of a small amount of slack in the economy and that should merit the BoC ending cuts for some time especially amid the looming effects of tariffs on inflation and rising inflation expectations.”
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
SONIA: 3.5k More Of the SFIM5 95.6 Put
Feb-17 12:20
SFIM5 95.60 put, bought for 2 in 3.5k.
- Now 7.5k total for the session.
GERMANY: Nagel Sees 1.5pp Negative Growth Impact for Germany In Tariff Scenario
Feb-17 12:10
ECB's Nagel expects the German economy to "suffer considerably" from the implementation of US tariffs per US President Trump's election campaign (tariffs on imports from China at 60 percent, while products from Germany and other countries would face 10 percent), according to his speech today in Frankfurt.
- Nagel cites a Bundesbank scenario analysis, concluding a negative impact on GDP of a cumulative 1.5pp by 2027.
- Models are more inconclusive on inflation though, with Nagel noting one only sees slight effects while another one points towards clear upwards pressure.
- We'd note that actual tariff proposals by the US administration have so far come short of the election campaign plans.
- More broadly, the uncertainty posed by tariff risks has been a common theme in commentary from other ECB officials:
- Bank of Italy Governor Panetta over the weekend: "The tariffs could produce upward pressures linked to a depreciation of the euro against the US dollar and to possible retaliatory measures from the EU [...] However, these effects could be offset by a slowdown in the global economy and by China diverting its tariffed goods to European markets'”. The net impact of US tariffs would be limited or even 'slightly negative'.
- ECB President Lagarde on Feb 10: "Greater friction in global trade would make the euro area inflation outlook more uncertain".
- ECB Chief Econ Lane on Feb 5: "Risks to economic growth remain tilted to the downside. In addition to trade policy uncertainty, lower confidence could prevent consumption and investment from recovering as fast as expected".
OUTLOOK: Price Signal Summary - Bund Futures Pierces A Trendline Support
Feb-17 11:59
- In the FI space, Bund futures are trading lower and in the process have pierced an important short-term support at 132.05, a trendline drawn from the Jan 15 low. A clear break of this line would strengthen a bearish theme and signal scope for an extension towards 131.59 next, the 61.8% retracement of the Jan 14 - Feb 5 bull leg. Below 131.59, lies 131.00, the Jan 25 low and a key support. For bulls, a resumption of gains would refocus attention on the bull trigger at 133.71, Feb 5 high.
- A bull cycle in Gilt futures remains in play and the latest pullback appears corrective for now. Last Thursday’s gains are a positive development and appears to be a bullish engulfing candle. A resumption of gains would open 94.35, the Feb 6 high and a bull trigger. Clearance of this level would open 94.75, the 76.4% retracement of the Dec 3 - Jan 13 bear leg. The next firm support to watch lies at 91.52, the Jan 24 low.
