Analysts at TD Securities explained that market sentiment was fairly neutral relative to the euphoric sessions in Asia and Europe, with US equities ending the day unchanged while the TSX eked out a 0.1% gain.
“Rates were likewise little changed on the day, with yields rising by ~1bp across the curve in Canada while the Treasuries steepened modestly.
Cable (-1.4%) was the big mover in G10 FX after PM May repeated that no deal is better than a bad deal after the EU rejected her Brexit plan, injecting more uncertainty into the process.
Elsewhere, the USD saw broad, albeit modest, gains against G10 currencies.
The RBNZ OCR is the main risk event for the coming week along with Wednesday’s FOMC meeting
What We’re Watching in Markets
This week’s Fed meeting is the appetizer to the mid-term entree in Nov. Still, the break of the 1.1750 level is important for the EUR, suggesting we could see higher lows there moving forward.
A mix of higher global rates and equities is a bad mix for the JPY, though it is decoupling from cyclical drivers that point to 111.40. We fade breaks of 113.
In light of the persistence in recent non-core core price shocks, and still high inflation expectations, we have revised higher our outlook on inflation convergence in Mexico, and as a consequence our view on the easing cycle.
We now see easing beginning not in December, but in Q2 of 2018. We continue to remain constructive on the peso against the USD.”