Tomorrow is Forecast Contract Wednesday: April 15, 2025

Tomorrow will be eventful from a ForecastTrader Contract and economic calendar perspective – we have retail sales and industrial production due from the states as well as an interest rate decision from the Bank of Canada (BoC). I’ll go through trades that I like for two out of three below as I believe there are favorable risk-reward dynamics at play for investors. I’ll also cover some of the details pertaining to tomorrow’s coinflip decision by the BoC.

US Retail Sales Expected to Bounce Back

Wall Street is expecting a big recovery in last month’s retail sales following two dismal months in January and February, and if shoppers didn’t show up in force in March, first quarter GDP is likely to be negative. But since retail sales is heavily influenced by goods, we would need to wait until Personal Income and Outlays data arrive later in the month, since those consumer spending figures are well balanced across goods and services.

Turning back to retail sales, the median estimate among economists is 1.3% month over month (m/m) and I like a directional combination trade against that backdrop starting at a contract threshold of 0.4% all the way down to 0%. Buying the “Yes” answers on all five thresholds will cost $3.34 and pay out $5.00 if retail sales come in at 0.5% or above. The directional combo still delivers a profit on a huge downside miss, meanwhile, considering that the expectation is 1.3%. Furthermore, if the print comes in at 0.4%, the trade still profits because the four thresholds below will deliver $4.00 and the investor paid $3.34.

Industrial Production Report Creates Opportunity

A similar directional combination trade that I like concerns the industrial production report for March. It involves buying the “Yes” answers for contracts with year-over-year (y/y) thresholds of 0.5%, 0% and -0.5% for a total of $1.72. If the report comes in as expected at 1.1%, then the trade pays out $3.00. Even a huge downside miss at 0.6% will still pay out $3.00. Moreover, a result of 0.1% will still deliver a profit to the investor, considering he/she paid $1.72 and will collect $2.00 from the 0% and -0.5% thresholds.

BoC Rate Decision is a Toss Up

Global forecasters are confounded regarding tomorrow’s Bank of Canada decision. It’s a 50-50 coin flip and could really go either way. But this morning’s much lighter-than-expected Consumer Price Index (CPI) may justify a reduction in rates. If you think the central bank will indeed cut, then the “No” answer, which costs $0.50, may pay out $1.00. But if you think the institution will sit back and wait for further developments on the trade front, which could ignite inflationary pressures, then the “Yes” answer at $0.50 is for you. This one is a close one, but if I had to choose, I would go with the “No” because Canadian economic growth has been decelerating alongside the pace of inflation, allowing the governing council to step down from 2.75% to 2.5%. 

Canada CPI Much Lower than Expected

Finally, yesterday’s potential homerun, directional combination opportunity on Canada’s CPI, didn’t work out fully, but investors that bought the “Yes” at 2.1% and 2.3% for a total of $0.87 still made it to first base in single fashion, considering that the 2.1% “Yes” delivered $1.00. The 2.3% didn’t, however, because the CPI came in at that number, failing to exceed it.  

Source for Images: ForecastEx

Note: Prices are highest bids as of the morning of April 15, 2025. Red circles around the thresholds were inserted by J.Torres to highlight his preferred, directional combination trades.

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