Log in to our mid-week North American Markets overview, where we examine the current themes in North America and provide an overview of indices and currency performances.
This week, some data dampened the economic outlook for both the US and Canada. The past four months didn’t show much in that aspect, and participants started to believe that tariffs wouldn’t influence activity that much.
However, it seems that the markets were too optimistic for North America. August gave a first warning sign, with the US Non-Farm Payrolls showing the first crack in the labor market, which was confirmed by last Friday’s report.
Canada is also struggling with a regressing GDP in the second quarter, undoubtedly due to downbeat employment figures (-60K in August) and pressure from tariffs on key exports such as metals (aluminum, steel) and lumber.
The degrading economic outlook and slowdown in hiring are essentially bringing back hopes for cuts with a 90% priced-in Bank of Canada reduction (from 2.75% to 2.50%) at the upcoming meeting on the same day as the FOMC, September 17th.
For the Federal Reserve, a much-anticipated cut should also finally take place (Rates are currently at 4.50%), and the question from which we will get an answer tomorrow is:
Will Consumer Prices take a significant bump, barring the way for a 50 bps cut?
Any release below the expected 0.30% raise should flush the US Dollar, and markets would heavily lean towards a 50 bps (currently at 10% pricing).
On the other hand, a beat should leave the 25 bps in check but reduce odds for cuts at subsequent meetings (2 meetings after this one: October and December).