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US Open Preview – Canadian inflation awaited; trade talks loom in background
May 18, 2018 11:26 amVideo
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Here are the latest developments in global markets:
Day ahead: Canadian inflation prints eyed; Potential trade comments also on the menu
On the data front, Canada’s inflation and retail sales data will probably attract the most attention. Besides those, any developments in the ongoing US-China trade talks in Washington could also attract attention.
At 1230 GMT, Canada will see the release of its inflation data for April. The headline CPI rate is expected to have held steady at 2.3% in yearly terms, while no forecast is available for the core rate, which excludes the effects of volatile items such as food and energy. As for retail sales, expectations are mixed. On a monthly basis, the headline print is expected to have to have risen by 0.3% in March, down from 0.4% in February. Meanwhile, the core rate is anticipated to clock in at 0.5% month-on-month, after posting no growth previously.
Recall that at its latest policy meeting, the Bank of Canada (BoC) maintained a relatively cautious stance, dismissing the recent surge in inflation as reflecting mostly transitory factors that will fade over time. Hence, these data will likely be instrumental in shaping expectations regarding the timing of the Bank’s next rate increase; markets currently see a 40% probability for a hike at the May 30 meeting. A strong set of prints that pushes that probability higher could work in favor of the loonie, and vice versa.
On the trade front, negotiations between US and China continue in Washington. Talks appeared to be gaining momentum after media reports suggested China had presented the US with proposals to reduce the trade deficit between the two by $200 billion. However, China’s foreign ministry subsequently denied it made such an offer. Given this confusion, investors will likely look to comments from the officials themselves upon completion of the talks today, to gauge whether there has been progress. Any signs the talks are moving forward could support riskier assets, such as stocks. The opposite holds true as well.
In energy markets, attention will turn to the Baker Hughes oil rig count at 1700 GMT, for a fresh indication of whether US production continues to soar.
As for the speakers, Fed Board Governor Lael Brainard (permanent FOMC voter) will deliver remarks at 1315 GMT, while Dallas Fed President Robert Kaplan (non-voter for 2018) will also step up to the rostrum at the same time.
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