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US Open Preview – EU warns of retaliation to US tariffs, BoC rate decision pending
March 7, 2018 1:26 pmVideo
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Here are the latest developments in global markets:
Day ahead: Bank of Canada to announce interest rate decision; US ADP nonfarm employment report in focus
The Bank of Canada (BoC) will announce its rate decision at 1500 GMT and expectations are for the central bankers to keep interest rates steady at 1.25% after raising borrowing costs three times since July, when rates stood at 0.75%. In the recent weeks, investors have been paring back the odds of a potential rate hike since the economy seemed to lose momentum in times when the government was struggling to reach an agreement on the NAFTA front. GDP growth slowed down surprisingly to 1.7% y/y in the final quarter of 2017, following a downward revision in the Q3 measure, while it was a big surprise to see employment declining sharply in January. Trump’s punitive import tariffs on steel could be another reason for the BoC to leave monetary policy unchanged today as Canada owns the largest share of steel imports to the US and any implementation of the measures could exaggerate trade conflicts between the countries and make NAFTA negotiations much more difficult. While markets are already waiting for the BoC to hold a cautious tone given the above risks, a larger degree of pessimism in the central bank’s outlook could push the loonie lower.
Canadian trade statistics for the month of January will be also available today prior the rate decision at 1330 GMT.
Meanwhile in the US, investors will keep a close eye on the ADP nonfarm employment report due at 1315 GMT before they prepare their positions ahead of the famous nonfarm payrolls on Friday. According to analysts, the ADP readings which regard the US private sector are expected to show an employment increase of 195,000 in February compared to 234,000 seen in the previous month. Government’s nonfarm payrolls which track changes in both the private and public labor sectors are anticipated to stand flat at 200,000.
In other data out of the US, the Fed’s Beige Book will give an overview of the current economic conditions in each of the 12 Federal districts at 1900 GMT, while the Energy Information Administration will publish its weekly report on US oil inventories earlier at 1530 GMT.
Elsewhere, Japan will see the release of the GDP growth figures for the final quarter of 2017 at 2350 GMT. However, these will be the second estimates and are likely to have a moderate impact on the yen. Forecasts continue to support a growth rate of 0.9% y/y, although first GDP growth estimates came in lower at 0.5%. Data on private consumption and capital expenditure will also attract some attention.
As for today’s speakers, we will hear from Atlanta Fed President Raphael Bostic (voter), as well as New York Fed President William Dudley (voter), at 1300 GMT and 1320 GMT respectively.
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