Wall Street Analysts Weigh in on Latest NFP Data 
New York Fed President John Williams Signals Rate Hold as Economy Seen Strong in 2026 
MAS Holds Monetary Policy Steady as Strong Growth Raises Inflation Risks 
Bank of America Posts Strong Q4 2024 Results, Shares Rise 
Fed Confirms Rate Meeting Schedule Despite Severe Winter Storm in Washington D.C. 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
Bank of Japan Likely to Delay Rate Hike Until July as Economists Eye 1% by September 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
Bank of Canada Holds Interest Rate at 2.25% Amid Trade and Global Uncertainty 
Bank of England Expected to Hold Interest Rates at 3.75% as Inflation Remains Elevated 
China’s Growth Faces Structural Challenges Amid Doubts Over Data 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
Urban studies: Doing research when every city is different 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
RBA Deputy Governor Says November Inflation Slowdown Helpful but Still Above Target 
BoC is scheduled for their monetary policy next week. It looks like another BoC communications flip-flop. Senior DG Wilkins stoked rate cut speculation with comments suggesting that policy makers had room to manoeuver on rates and could look through on-target inflation and strong jobs if need be. Her comments came amid a speech on broader financial stability issues and markets perhaps read a little too much into them, given the context. But investors can be excused for being sensitive to the Senior DG’s comments, given the 2017 experience. It was left to Gov. Poloz to tidy the outlook up Thursday by showing little inclination to acknowledge near-term easing risks; policy is already accommodative and “about right” the governor remarked. Rates may still ease a little more but the risk of a near-term cut is zero and OIS pricing is adjusting to reflect that (implying around 7% probability of a Dec 4th ease at writing, down from 26% following Wilkins’ remarks).
The outlook for the CAD over the coming week (and perhaps a bit beyond) is very mixed, on the basis of our charts below. On the one hand, relative data surprises continue to shift in the favour of the USD while the seasonal under-performance in the CAD may still have some room to run (even if this year’s “flight path” for the CAD looks a bit more like 2017 than the average CAD performance over the year since 1990).
On the flip side, the CAD is most tightly correlated with US/Canadian 5Y bond spreads while speculative accounts continue to prefer long CAD positioning. But neither the narrowing USD yield advantage nor bullish CAD speculative sentiment is getting much traction with the exchange rate. The fundamental situation suggests the most likely course of action is a little more range trading around current levels in the coming week between 1.3370/80 and 1.3190.
The Canadian data schedule is relatively light over the coming week; Wholesale Trade data for Sep are released Monday. Q3 Current Account data are published Thursday. Sep and Q3 GDP data are released Friday. Growth is expected to slow sharply from the 3.7% clip recorded in Q2 (Q/Q, ann.) but that will be in keeping with BoC expectations (and should therefore have no bearing on the near-term rate outlook). Scotiabank Economics’ GDP Nowcast is tracking Sep (M/M) industry-level GDP at a little below zero and Q3 GDP at 1.2% (just below the BoC’s Oct MPR forecast of 1.3%).
Options Trades Recommendation: We advocated USDCAD diagonal debit call options spreads at spot reference: 1.3063 level in 3m/2w debit call spread structure (strikes 1.3215/1.3793) for a net debit.
OTC Outlook: The bullish neutral risk reversal numbers indicate the bullish setup, positive RRs are indicating the hedging sentiments for the upside risks. While the positively skewed IVs of 3m tenors are also indicating the upside risks. Courtesy: Saxo & Scotiabank
