The data aren't providing any reason for the Bank of Canada to pause. The risks are on the upside for rate increases. Investors are going to sell bonds.
The market is starting to price out some of the rate increases that have been priced in.
The strength of today's report certainly will not be lost on the Bank of Canada ... as a result, we still believe the odds favor another rate hike from the bank in April.
The weakness in the Canadian dollar is essentially a follow-through from yesterday's Fed rate decision that has the market anticipating at least one more hike.
There's little market reaction I think for two things. First, the strength was anticipated to some extent. Second, the market is very tightly focused on what the Bank of Canada is doing this afternoon.
They said nothing's changed in their view of the economy so markets focused on the word 'modest' to mean they'll be less aggressive.
This basically confirms their story, so steady as she goes on that front.
This is really a tale of two job markets.
This may be partly a commodity price story.
This morning's merchandise trade report certainly came as a shocker, but this is one case where the headline looks much worse than the details of the data.
This report paints a picture very similar to the fall survey and shows an economy practically at full capacity.
What we're seeing in terms of currency movements - and it will probably continue at least over the near-term - is a shift in global monetary policy expectations. There's a gearing-down of expectations for Fed tightening, coupled with increased tightening expectations elsewhere.
You should see Canada's 10-year bonds rally in the second half of this year. I don't see a big appetite on the part of the Bank of Canada to hike interest rates as the economy slows. There is no compelling reason to go beyond 4 percent.
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