-- According to Rosenberg Research in a comment on Canada within Wednesday's 'Early Morning With Dave' note a "most curious development today" is why traders still believe the Bank of Canada will be making its next move a rate hike, "or a steady diet of rate hikes, for that matter."
"Consumer confidence just sagged to its lowest level in 11 months, so why not add interest rates to the list of factors depressing the local economy?," asks Rosenberg Research, sarcastically.
At a time when, pre-Iran war, there was absolutely no inflation problem to speak of, it notes.
Over the past month, the research notes, the share of Canadians seeing economic improvement has practically been sliced in half to a mere 15% from 27%. And for the first time in over four years, the Canadian economy has shed more than 100,000 jobs in a two-month span. "Fertile environment for a BoC rate increase, don't you think?," it says, while also noting home sales in the Greater Toronto Area (GTA) in March were 52% below the norm of the past 10 years.
"So as things stood before the Iran war, all Canada's central bank was doing in its easing process was pushing against a string because it's difficult to stimulate credit-related activity when domestic consumer balance sheets are saddled with a near-record debt-to-income ratio," it said.
Rosenberg Research further asks: Concerned about inflation in Canada? How about deflation? As, it says, in the grim reality that average home prices, which represent $8.5 trillion of assets on the household balance sheet (2.5 times the size of nominal gross domestic product), have declined 7% over the past year in the GTA -- and more to come with supply hitting the market to such an extent that new listings have ballooned 11.5% on a year-over-year basis.
Rosenberg said that it wasn't the only one who didn't see a BoC rate hike because the foreign exchange market was doing so too by taking the Canadian dollar (CAD or loonie) to $1.39 (below 72 US cents) for the first time in four months.