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The announcement of Canadian purchaser spending statistics is probably telling that the Bank of Canada is going to let the rates remain untouched going forward, and might even think about lifting rates. Canadian retail sales are expected to leap 0.6 % through May, showing that expenditure stays tough and is going to be a positive provider to Q2 GDP. Certainly, Canadian across-the-board sales throughout the same time – a good leading indicator for the headline retail sales reading – considerable rise of 1.6 percent on the back of spending on farm foodstuffs and private goods, such as clothing and domestic goods. However, this retail sales report indicates downside risks as well. Throughout May, gas prices jumped higher and in June, the joblessness rate went higher to 4.2 percent from 4.1 percent. Nonetheless, the possibilities are in facing the direction of tough Canadian retail sales information, which reminds of the Bank of Canada’s extra forceful posture in their strategy announcement last Tuesday, when the Bank left rates steady at 3.00 %. The Bank indicated three matters influencing the market: the US financial slowdown, the monetary market chaos, and rapidly rising product prices. Whilst the initial two had grew in the same level with the anticipations explained in the April Monetary Policy Report, the last has been tougher than expected and as a consequence, "total CPI inflation over the next year is anticipated to be much higher than predicted when April Report was about to be released." Obviously, the Bank of Canada now takes an extra hawkish bias than formerly did, and there is some possibility that they will think about a rate hike soon in the year. Actually, in 2004, the Bank of Canada cut rates three times sometime in January and April, just to rotate and begin lifting rates in September.
Bonds – 10-Year Canadian Government Bond Futures
Canadian government bonds have recovered from struggle at 119 in current days, and if May retail sales can state proof that the purchaser might be able to maintain the Canadian market, the deal could fall below near-term support at 117.60 toward 117. Anything less than anticipated, but might provide traders all the proof they require beginning pricing in an additional rate cut and CGBs might aim 119 again.
05:19
Posted on Jul-21-2008
