Markets began the week on a soft note – TDS

Analysts at TD Securities explained that the North American markets began the week on a soft note, with US equity indices trading lower (SPX: -0.6%) while Canadian stocks outperformed on a more modest decline (-0.3%).

Key Quotes:

“Treasuries were well anchored in the front-end as the curve bear-steepened, with 2s10s widening by 2bps, while Canadian fixed income outperformed by 1-2 bps across the curve.”

“The USD traded lower in a broad selloff against G10 FX.”

“JPY (unch) was the one exception ahead of today’s BoJ meeting, where we do not expect any change in policy. SEK +1.1%) surged on better-than-expected GDP data while EUR (+0.4%) held within its recent range.”

“The BoJ kicks off a busy week for central banks and is complemented by a packed data calendar.”

What we’re watching in markets

“The BoJ kicks off a busy policy & data week. Despite some speculation of a change, it is difficult to see the Board talking taper and YC “flexibility” when the BoJ conducted a third “unlimited” JGB purchase overnight. We expect no change to policy settings (10yr target 0%, policy balance rate -0.1%) as does the unanimous analyst consensus. USDJPY is holding around 111 awaiting BoJ guidance.

We also hear from the Fed, BoE, RBI (+25bp expected for the latter two) as well as on hold decisions from Banxico and Brazil’s COPOM. The USD likely to be choppy albeit in recent ranges overall as summer markets prevail and investors eye Friday’s US employment data.

USDCAD is steady despite comments over the weekend from a US official that NAFTA talks have made “absolutely amazing” progress. A cluster of support levels come into focus around the 1.2900 level this week.”