Financial Markets Monthly:

Divergence re-emergence

Highlights from this month’s Financial Markets Monthly:

• The theme of monetary policy divergence re-emerged somewhat in April as the Bank of Canada and Bank of England sounded a bit more dovish while investors are increasingly convinced the Fed will continue with steady rate hikes.
• Expectations of a more hawkish Fed and a rising inflation premium pushed 10-year US Treasury yields temporarily up to 3% for the first time in four years.
• Given the BoC’s cautious tone, we no longer expect a rate hike in May. But we still think the data supports 100 basis points of rate increases by mid-2019.
• Along with the change in our BoC call, we now think the Canadian dollar will remain closer to current levels this year rather than the slight rally previously assumed.
• Our forecast still assumes the BoE will raise rates next week, but the decision looks much more finely balanced than it was a month ago.

To view and download the new report, click on the following link:

fmm-May2018.pdf

Related link:

Use the link below for quick access to the interest rate and exchange rate forecast detail table.

rates.pdf

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Lorraine Gingras | Mortgage Specialist l RBC Royal Bank | Royal Bank of Canada | 4501 West 10th Avenue, Vancouver , BC V6R 2J2 | T. 604-315-6216 | lorraine.gingras@rbc.com