The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

1032 ET - BMO Capital Markets chief economist Doug Porter expects four more quarter-point rate cuts from the Bank of Canada this year amid President Trump's hefty tariffs and Canada's retaliatory measures. This would take BOC's policy rate to 2% by July. Porter had previously expected the BOC's rate-cutting cycle to end at 2.5%. Porter says the risk is the BOC cuts even deeper, "if the BOC is comfortable with the prevailing inflation backdrop later this year." Porter says this will weigh on the Canadian dollar, although it is holding steady in Tuesday trading. Porter doesn't rule out USDCAD rising above C$1.50. (paul.vieira@wsj.com; @paulvieira)

1029 ET - The Japanese yen remains on course to become the best-performing G-10 currency this year, Rabobank forex strategist Jane Foley says in a note. The Bank of Japan is currently the only G-10 central bank maintaining a policy tightening bias, she says. With real interest rates adjusted for inflation still negative, further BOJ rate rises look likely, she says. President Trump's claim that Japan is trying to weaken the yen provide another incentive to add speculative bets on the currency rising, she says. "We maintain a year-end forecast of USD/JPY 145, with downside risk." USD/JPY falls 0.9% to 148.228, having earlier reached a 20-week low of 148.100, according to FactSet. (renae.dyer@wsj.com)

1027 ET - Credit assets are still attractive as volatility is low, dips are shallow and they look likely to offer low but positive returns, BNP Paribas credit strategists say in a note. "The credit cycle has room to run, and supply-demand for bonds is balanced by still-high yields," BNP Paribas says. Investors should look to add credit assets as they appear over sold, the analysts say. (miriam.mukuru@wsj.com)

1025 ET - Deutsche Bank's economics team has held one of the Street's most hawkish views of how the Fed will likely handle 2025, forecasting that the central bank won't cut rates once this year. That's still the team's official stance, but chief U.S. economist Matthew Luzzetti acknowledges that the fallout from the new Trump tariffs could jeopardize that projection. "You have certainly begun to see some of the negative effects of trade uncertainty in the economic data," Luzzetti tells WSJ. "To the extent that extends and shows up in weaker labor market data, that could the fed to cut rates this year." Before changing its Fed forecast, though, Deutsche wants to see how long tariffs are kept in place, Luzzetti says. (matt.grossman@wsj.com, @mattgrossman)

1020 ET - Citi's economics team is forecasting that Friday's jobs report will show a gain of 135,000 jobs in February. But it might be the last good news about the labor market for some time, the Citi team writes. "We continue to see downside risks for job growth and a further increase in the unemployment rate into the spring and summer, a time of year when hiring would typically pick up but could remain weak," Citi writes. "February may be the last month of 'healthier' employment data for some time." Citi sees unemployment ticking up to 4.1% in February. Its view is a bit more downbeat than the WSJ survey consensus, which expects 170,000 new jobs in February and a steady unemployment rate at 4%. (matt.grossman@wsj.com, @mattgrossman)

BMO says the Bank of Canada is now likely to cut for a seventh straight time next week, even though 4Q GDP data indicated the economy performed well above expectations. "'Moderate Recession' In the Cards for Canada With Hefty Tariffs -- Market Talk," published at 08:39 a.m. ET incorrectly said a Bank of Canada cut would be the eighth consecutive reduction in rates.

1016 ET - Artificial intelligence is critical for telcos to survive and thrive, the World Economic Forum's Bart Valkhof says at the Mobile World Congress in Barcelona. "Telcos are ahead of the AI curve, both when it comes to the spend based on revenue, and in terms of growth of spend," Valkhof, who is the WEF's head of information and communication technology industry, adds. However, the implementation is mostly experimental and not really done at scale yet, he notes. Additionally, operations have become more complex and vulnerabilities are happening. Therefore, Telcos need ambition and vision to scale AI in their operations, he says. (najat.kantouar@wsj.com)

1002 ET - A weakening dollar is a bit of a surprise, as analysts expected the currency to strengthen because of tariffs. Deutsche Bank's George Saravelos writes that "a tariff is simply a tax and therefore represents a fiscal tightening." Policy uncertainty is also rising. So, it makes sense for markets to price in "a narrowing of the growth differential between the U.S. and the rest of the world," Saravelos says. He adds that the dollar's safe-haven status could also weaken. Saravelos is neutral on the dollar outlook, but "we are starting to become more open-minded to the prospects of a broader weaker trend." The WSJ Dollar Index is down 0.3%. (paulo.trevisani@wsj.com; @ptrevisani)

0945 ET - This is the first time since mid-2024 that most European bond markets can operate without material fear of disruptions over domestic politics, says BNY's Geoff Yu in a note. On a combined basis, French and German bonds haven't found a period of consistent purchases throughout the past year, the senior EMEA market strategist says. "Presently, both have been net sold since November last year, which is the worst combined run over the past 15 months," he says. BNY acknowledges that markets would likely remain on the defensive as it is currently difficult to price in both inflation and term premiums. (emese.bartha@wsj.com)

0940 ET - Bank of Nova Scotia economist Derek Holt says the selloff in financial markets to President Trump's 25% tariffs on Canada and Mexico has so far been relatively tepid. He cites a few reasons: traders have priced in the tariff risk; that the retaliatory response--at least from Canada--falls shy of what the US has enacted; and it's unclear how long Trump will keep the tariffs in place. Holt reckons Trump imposed the tariffs ahead of his Tuesday night address to lawmakers to point to progress on the trade front. Holt adds that perhaps traders believe souring risk appetite might provoke a pivot from Trump, given how closely the president keeps tabs on the stock-market's performance. (Paul.Vieira@wsj.com; @paulvieira)

0931 ET - Coupons on new euro investment-grade bonds moved lower to an average of 3.5% in February from 3.8% in January, CreditSights analysts say in a note. New euro IG bonds issuance amounted to 75.3 billion euros ($78.9 billion) in February, CreditSights says. Supply was concentrated in the 5-year to 7-year maturity segment and in the 7-year to 10-year maturity segment at 25% and 24% respectively, the analysts say. Proceeds are going toward general corporate purposes at 55%, refinancing at 31% and toward mergers and acquisitions at 12%, CreditSights says. (miriam.mukuru@wsj.com)

0915 ET - Investors grappling with uncertainty amid tariff-fueled concerns about inflation and economic growth are advised to move fast, rather than being immobilized, deVere Group's Nigel Green says in a note. "As inflationary pressures are likely to mount, global portfolios must adapt." He says sectors that could benefit in the new environment include commodities, energy and industrials. "Companies that can pass on costs without eroding demand will outshine competitors struggling to maintain margins," he says. He also recommends "hard assets, inflation-hedged investments and emerging market opportunities tied to evolving trade flows." (paulo.trevisani@wsj.com; @ptrevisani)

(END) Dow Jones Newswires

March 04, 2025 10:32 ET (15:32 GMT)

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