Canada: Steady inflation to keep captain hawk patient - TDS

Analysts at TDS note that Canadian headline CPI inflation cooled from 2.1% to 1.9% y/y (market, TD: 1.9%) on the back of a softer than expected m/m variation of -0.4% (market, TD: -0.3%). 

Key Quotes

“Last week's interview by Governor Poloz and CPI report continue to support our view that policy rates will end the year at 1.50% and that the next rate hike will come a bit later than the market thinks—in July in our view.”  

“Rates: There was a knee-jerk move lower in front-end rates following the data, and while we believe that markets have priced in too much tightening for 2018, we do not think the reaction to this particular data point was warranted.”

“FX: USDCAD continues to run cheap to cyclical drivers, leaving room for an upside move in the pair as market pricing for a Q2 rate hike looks aggressive.”