Odds of a Bank of Canada rate cut in July now just 7% from 16% on Friday, according to pricing in the overnight index swaps market, says Jimmy Jean of Desjardins Capital Markets, but "I don't sense that there is a fundamental shift in what the market is seeing or expecting" and "we haven't seen much of a move on the curve." Although Jean stood out for noting an "incremental" dovishness in Gov Mark Carney's comments last week on providing stimulus if the US hits fiscal cliff (not his baseline scenario), he predicts the central bank will start hiking rates in January 2014. Like others, he doesn't think the 1-year delay in eliminating the federal budget deficit has implications for monetary policy. "The dominant driver is the fiscal cliff. That overrides pretty much everything these days," he says.
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