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Analysts at TD Securities explained that the US curve continues its steepening bias from Friday amid rumors the BoJ may tweak policy to make the interest rate backdrop less oppressive for domestic banks.  

Key Quotes:

“This sets up a messaging problem, however, with inflation far from target. Though changes could be made elsewhere (ie. ETFs) we rather think speculation over next week’s meeting is part of a communication strategy to warm markets up for an eventual tweak further in the future.”

“News flow surrounding trade policy builds this week on NAFTA and US/EU relations. On the former, we monitor the tone of bilateral discussions; we remain skeptical but any signs of a thawing between US/Mexico relations is not necessarily good news for CAD as “singling out” Canada could lead to a more fractured relationship. Note that no bilateral meeting is scheduled between US/Canada trade reps. As such, USDCAD should continue to find dip buying support.”