Macro Minutes RBC Capital Markets

Two developed market central banks have already cut - Riksbank and SNB - and the BoC, ECB and BoE should follow suit over the next couple of months. But the higher for longer theme is dominating the US rates market. The divergence in macro and policy is the major theme in rates markets. The other important theme is that despite Fed cuts being priced out, risk assets continue to perform well with the S&P making new highs and credit spreads at cycle tights.
Participants:
Jason Daw (Desk Strategy), Head of North America Rates StrategyIzaac Brook (Desk Strategy), US Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsLori Calvasina (Research),Head of U.S. Equity Strategy
Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Markets have been ultra-sensitive to data for some time now, going back to market pricing for hikes starting in late 2021. More recently, several strong US inflation prints have de-railed the potential for upcoming Fed cuts, while upside surprises have occurred in Canada, the UK and Australia in the recent weeks. Will these data points be determinant for upcoming central bank decisions? What important releases are to come?
Participants:
Simon Deeley (Desk Strategy), Canada Rates StrategistMichael Reid (Desk Strategy), US EconomistCathal Kennedy (Desk Strategy), Senior UK EconomistSu-Lin Ong (Research), Chief Australia EconomistLuis Estrada (Desk Strategy), LATAM FX Strategist
Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

The latest resilience in the US has kick started a debate about how much other regions that appear to not show the same kind of underlying strength can diverge from the Fed and cut rates regardless. We see the best chances of that happening in Canada, but also provide updated views on the BoE, ECB and RBA. Meanwhile, the gyrations in the JPY keep investors on their toes and we add our voice to the mix of what lies in store.
Participants:
Peter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsBlake Gwinn (Desk Strategy), Head of US Rates StrategyJason Daw (Desk Strategy), Head of North America Rates StrategyCathal Kennedy (Desk Strategy), Senior UK EconomistSu-Lin Ong (Research), Chief Australia Economist Blake/Izaac: FOMCElsa Lignos (Desk Strategy), Head of FX Strategy
Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Expectations for Fed rate cuts this year are wavering as US economic data continues to come in hot. But that economic performance hasn’t necessarily been replicated in other regions. Will other major central banks feel pressure to keep in step with the Fed or start marching to the beat of their own drummers?
Participants:
Blake Gwinn (Desk Strategy), Head of US Rates StrategySimon Deeley (Desk Strategy), Canada Rates StrategistPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsSu-Lin Ong (Research), Chief Australia Economist
Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

The question on everyone’s mind is when central banks will start cutting rates. Over the past month, market pricing has progressively gravitated from a near certainty that the BoC and Fed would cut by June to now under a 50% chance. In the UK the pricing for a June cut is higher than a month ago but less than two weeks ago, while for the ECB the market has been resolute in pricing a June start date.
Participants:
Jason Daw (Desk Strategy), Head of North America Rates StrategyBlake Gwinn (Desk Strategy), Head of US Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsLori Calvasina (Research),Head of U.S. Equity Strategy
Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

While markets are parsing through central bank communication for the timing and pace of rate cuts, the future of central bank balance sheets is increasingly in focus as well. What will happen with quantitative tightening? And what will balance sheets look like in a future steady state?
Participants:
Simon Deeley (Desk Strategy), Canada Rates StrategistBlake Gwinn (Desk Strategy), Head of US Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsRobert Thompson (Research), Australia Macro Rates Strategist
Research Analyst opinions are their published views, independent of those expressed by Desk Analysts