Canada’s inflation cooled to its slowest pace since June at 2.8% and closely-watched core inflation measures eased to more than two-year lows, prompting markets to up bets on a June rate cut there. Canada’s dollar eased back afterwards.
And there was good news too heading into Thursday’s Bank of England policy meeting as data showed British inflation easing by more than economists and the BoE itself had expected, falling to a more than 2-year low at 3.4%.
While a first BoE rate cut is fully priced in by its August 1 meeting, markets now see a 50% chance of a move as soon as June. Gilt yields and sterling fell after the news.
There were other encouraging signs too. A downward revision to the Swiss government’s 2024 inflation forecast to just 1.5% has spurred talk the Swiss National Bank could be the first to ease policy as soon as Thursday – knocking back the Swiss franc to its weakest level of the year so far.
On the flipside of all the rate cut speculation was the BOJ’s move to finally tighten its super-loose stance on Tuesday. But even though Tokyo markets were closed for a holiday, indications of continued BOJ bond buying pushed the yen through 151 per dollar to its weakest of the year.
The upshot of all those moves is the dollar’s index is at its highest in almost three weeks going into the Fed decision.
And aided by good demand at Tuesday’s 20-year Treasury bond auction, the global picture has allowed Treasury yields to fall back a bit too.
