RBC Capital Markets

Day ahead: The BoC decision this afternoon isthe highlight of the day ahead (see CAD) and the hurdle is high for the BoC delivering a positive surprise. March CPI data are also due in the UK and Canada (see CAD and GBP). There are no key data due in Europe or the US and the earnings calendar in the US is light today.

CAD: Our economists expect the BoC to taper its QE purchases at today’s meeting and MPR release. Specifically, we see GoC bond purchases falling from CAD4bn/week to CAD3bn/week, with reductions across the curve but mostly concentrated in the 2y sector (down from CAD1.75bn/week to CAD1.1bn/week).

Part of this is from improved economic performance – both Q4 actual GDP and Q1 GDP tracking are well above the BoC’s January MPR projections – as well as from the lower expected bond issuance. Such a move is widely expected and should not have much impact on CAD, leaving attention focused on the Bank’s forward guidance on rates. T

Citi

Asia has seen a tentative continuation of moves in NY on Tuesday, with the USD continuing to gain ground and equities trading on the back foot. Our Japan equities colleagues for example have noted hedge funds cutting exposure. Data wise, there was little to move the markets overnight aside from an AUD retail sales beat, with macro headlines also thin. Signals remain mixed with our equities colleagues noting Low Risk is saying markets are due a correction in contrast to views in the FX market as outlined below.

In FX and rates space it is a more complicated picture, with CitiFX Strategy seeing room for USD weakness as US yield increases are set to slow, vaccinations are picking up in the rest of the world and data momentum is turning against the US.

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