- Very modest schedule of data and events to end the week; digesting RBA
Debelle's verbal intervention on RBA policy outlook, awaiting ECB
survey of forecasters, Canada CPI and Retail Sales, US earnings
- Canada CPI: Headline CPI seen decelerating to 10-month low, core CPI
seen holding at cyclical low - implies very modest BoC tightening
- Charts: EUR, AUD, CAD and Canada 10/30 yr yield spread, UST/Bund 10yr spread
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** EVENTS PREVIEW **
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As minimalist data and events schedules go, today's offering is certainly a gold medal calendar, with little than RBA's Debelle's comments leaning against markets' hawkish interpretation of the July minutes discussion of the neutral interest rate, and this afternoon's Canadian CPI and Retail Sales, and another rash of US Q2 Corporate earnings, along with monthly equity options expiry. Given the modest EUR reaction to Draghi's press reaction, and the outsized jump on the latest US political developments, it is debatable whether even a busier schedule would have any bearing on trading. In so far as the Bank of Canada is thus far the only central bank which has turned words into action in terms of the less accommodative signals since mid-June, today's CPI has the potential to reinforce the CAD rally, or prompt some profit-taking. Given that headline CPI is seen at a rather low 1.1% y/y , with Core Common CPI seen little stronger at an unchanged 1.3% y/y, it is unsurprising that some forecasters and commentators are questioning just how aggressive the BoC will be in tightening policy, and by extension whether the CAD rally will shortly run out of steam, just as the AUD rally was bought to a juddering halt overnight by Debelle. Indeed the very sharp flattening in the Canada GoC curve between 10 and 30 yr since the BoC signalled a less accommodative stance also suggests that markets are discounting a very gradual pace of tightening.
from Marc Ostwald
