Morning Note: Markets Watch: US CPI & BoC Rate Decision in Focus

CAD Interest Rates and US Inflation on the Radar 

SP500: Renewing All-Time Highs

The SP500 remains close to its all-time highs, reflecting the prevailing optimism in the markets. However, the candle formed on December 9th presented a Bearish Engulfing pattern, a technical signal that could indicate a more significant pullback in the coming days. This pattern suggests that the buying force may be losing momentum, possibly due to profit-taking. Should the pullback materialize, the index may seek lower support levels before resuming its upward trend. The next most relevant interest levels are near 5,880.00 and 5,670.00, where a pullback may find support before resuming the upward movement.

Apple (AAPL): Sustained Upside Movement

Apple (AAPL) shares continue to renew all-time highs on the daily chart, demonstrating strong investor interest in one of the most consolidated assets in the market. The stock’s resilience reflects both the strength of the brand and the positive expectations surrounding its products and technological innovation. However, the question arises: How long will the upward movement be able to maintain its momentum without making a more significant pullback? For now, the trend remains positive, but investors should watch closely for signs of technical or fundamental weakness that could indicate a slowdown.

US CPI Data: Focus on Inflation

Today, the market will be paying close attention to the release of the US Consumer Price Index (CPI), which will provide another important piece of data on US inflation. A reading of 2.7% is expected, which is slightly above the Federal Reserve’s long-term target of 2%. This data will be crucial in assessing the future path of US monetary policy. Should inflation exceed expectations, there could be pressure for the Fed to adopt a more hawkish stance, which could have an impact on monetary policy in the medium term. On the other hand, a reading that is within or below expectations could reinforce the view that inflation is under control, reassuring markets and supporting equity indices.

Interest Rates in Canada: Need for Stimulus?

The Bank of Canada (BoC) has made consecutive rate cuts over the past four meetings. The first three cuts were by 0.25%, while the latest cut was a more aggressive 0.5%, indicating greater concern about the pace of the Canadian economy. This more drastic move suggests that the BoC may have realized the need for greater stimulus to sustain economic growth, especially in a challenging global environment. Now the market expects a 0.5% cut again, which would make the interest rate fall from 3.75% to 3.25%. If the cut is smaller than expected or there is no cut at all, it could favour the CAD. It’s important to keep in mind that while lower interest rates may boost economic activity, they also put pressure on the Canadian dollar, which is weakening against other major currencies. The market is now watching to see how this stimulus will impact Canada’s economic performance in the coming quarters.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.