The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0951 ET - Higher energy and food prices are likely to keep total inflation in Canada near 3% for the remainder of the year, says Michael Davenport from Oxford Economics. The end of the US-Iran ceasefire and the resumption of military attacks in the Mideast poses a significant risk to Canada's CPI outlook, Davenport adds. Offsetting this risk, however, is the amount of excess slack in the economy and continued easing in shelter inflation, which Davenport contends should keep core CPI at bay and the Bank of Canada on hold. (Paul.Vieira@wsj.com; @paulvieira)
0947 ET - Scads of spare capacity in the Canadian economy are keeping inflationary pressures in check, says Benjamin Reitzes, economist at BMO Capital Markets. Headline inflation slowed to 2.8% in June, or above the central bank's target for 2% inflation. Reitzes notes the Bank of Canada's two preferred gauges for core prices both fell below 2% for the first time since August, 2020. Upside inflation risk remains, as evident by the runup in gas prices after the US and Iran resumed military attacks. "But it's clear that the output gap is weighing heavily on underlying inflation," Reitzes says. "This will keep the BOC comfortably on the sidelines." (Paul.Vieira@wsj.com; @paulvieira)
0944 ET - The readings on closely-watched gauges of Canadian core prices suggests rate increases from the Bank of Canada "remain a long way off," says Bradley Saunders from Capital Economics. The average of the BOC's preferred CPI-trim and CPI-median measures, which strip out volatile items, rose by a meager 0.07% in June. Saunders says this knocked the 3-month annualized rate down to 1.6%, and pulled the annual core rate down below 2%--the first time this has happened in five years. The BOC sets rate policy to achieve and maintain 2% inflation. The yield on Canada 2-year bonds fell slightly after release of the CPI data. (Paul.Vieira@wsj.com; @paulvieira)
0943 ET - The Bank of England could slow its gilt sales, also referred to as quantitative tightening, in September, HSBC Global Investment Research economists say in a note. The BOE is expected to provide an update on its assessment of the impact of the quantitative tightening program on gilt yields during its policy meeting on July 30, the economists say. If the assessment shows the program is having a notable impact, the BOE could slow the pace of sales, they say. (miriam.mukuru@wsj.com)
0938 ET - Canada's total inflation decelerated to 2.8% in June, due mostly to lower gasoline prices following a pact in June between the US and Iran, says Andrew Grantham, economist at CIBC Capital Markets. Gas prices, however, have accelerated amid a renewal of military strikes in the Middle East. Grantham says prices rose 0.3% on a seasonally-adjusted basis when food and energy are excluded. He attributes this to temporary travel-related cost increases related to the World Cup matches in Toronto and Vancouver. The Bank of Canada's preferred measures of core inflation decelerated in June, and Grantham says this reinforces CIBC's call for the BOC to remain on the sidelines through 2026. (Paul.Vieira@wsj.com; @paulvieira)
0936 ET - Canadian inflationary measures are still looking relatively muted after four months of oil supply disruption, says Desjardins' Royce Mendes. The headline consumer price index fell 0.4% in June as lower global oil prices drove energy costs down, leaving annual inflation at 2.8%. Core inflation excluding food and energy picked up, rising 0.3% on-month in seasonally adjusted terms, though Mendes says that looks tied to the temporary effect of the World Cup. "Despite the recent spike in global oil prices, the Bank of Canada can rest easy that passthrough to other goods and services remains very limited," he economist says. (robb.stewart@wsj.com; @RobbMStewart)
0935 ET - The Japanese yen could weaken further as it appears the country's authorities have opted against interventions to prop up the currency during Monday's Marine Day holiday, ING's Chris Turner says in a note. The dollar could rise above 162.75-162.85 yen in coming sessions--on the assumption there are no interventions--as escalating U.S.-Iran tensions push energy prices higher, he says. The dollar trades flat at 162.40 yen, close to the 40-year high of 162.83 reached on July 1, according to LSEG. (renae.dyer@wsj.com)
0902 ET - Sterling's recent rally appears stretched given uncertainty over fiscal policy under new Prime Minister Andy Burnham, Ebury economist Enrique Diaz-Alvarez says in a note. Speculation that Burnham could choose Shabana Mahmood as treasury chief has been welcomed by markets as she's viewed as more fiscally responsible and business-friendly than other candidates, including Ed Miliband, he says. However, the lack of policy detail from Burnham so far "casts a pall of uncertainty over British assets." In his first speech as prime minister Monday, Burnham said he would announce cost-of-living measures on Tuesday. Sterling trades flat at $1.3457 while the euro falls 0.2% to 0.8488 pounds. (renae.dyer@wsj.com)
0901 ET - The World Cup had a material impact on Canadian inflation in June, according to Statistics Canada's CPI report. Total inflation slowed to 2.8% in June, and core prices decelerated as well. Offsetting month-over-month declines in gasoline and some food items was a 14.2% jump in travel-accommodation prices, concentrated in Vancouver and Toronto--the two cities that hosted World Cup games. Rental-car prices also climbed 31% in June from the prior month, reflecting the number of tourists to watch World Cup matches in those two Canadian cities. (Paul.Vieira@wsj.com)
0900 ET - Interest-rate differentials have moved against the dollar, Societe Generale's Kit Juckes says in a note. "The market now prices a 90% chance of an European Central Bank [rate] hike in September (with a further adjustment expected after this week's meeting) and a 70% chance of a Federal Reserve hike." The ECB is more sensitive to oil prices due to its primary mandate to maintain price stability. That provides some cushion to the euro from rising oil prices in response to the Middle East conflict. While this isn't sustainable, investors betting on a higher dollar will need to be patient, he says. The DXY dollar index rises 0.1% to 100.861.(renae.dyer@wsj.com)
0858 ET - Canadian inflation cooled more sharply than expected last month as drivers saw some respite at the pumps. The consumer price index fell 0.4% on-month, the largest decline since December 2024. In annual terms, inflation decelerated to 2.8% from May's 3.2% and against economist expectations for 3%. Gasoline fell sharply during June and increased at a slower rate on a year-over-year basis than in May. Excluding gasoline, inflation was steady at 2.2%, holding near the Bank of Canada's 2% target. The central bank's preferred median and trim measures averaged 1.85%, a level last that low in September 2020. Still, with global oil prices back up in July, economists remain on watch for signs inflation is taking hold more broadly. (robb.stewart@wsj.com; @RobbMStewart)
0851 ET - The Canadian dollar is holding steady relative to the US dollar despite President Trump's latest threat to impose a new set of tariffs on Canada due to smoke in US cities from Canadian forest fires. Karl Schamotta, chief market strategist at forex firm Corpay, says traders view the threat, which would add pollution-related levies on top of existing duties, "as more smoke than fire, and are not adding to the risk discount embedded in the currency," since the trade war between the two countries escalated last year. (Paul.Vieira@wsj.com; @paulvieira)
(END) Dow Jones Newswires
July 20, 2026 09:51 ET (13:51 GMT)
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