BoC meeting, US CPI and Yellen speech in focus – BBH

Research Team at BBH notes that the North American session features the Bank of Canada meeting, US CPI and industrial production, and a few Fed official speeches, including Yellen late an hour before the equity market closes.  

Key Quotes

“The Bank of Canada is widely expected to leave on hold.  We suspect Governor Poloz comments may be a little more upbeat, given the stronger employment report and the improved trade balance.  Of course, risks remain, including US trade policy, where many companies have pursued a continental strategy for more than two decades.”

“The US dollar approached CAD1.30 yesterday for the second time in four sessions, and it would mark a near-term bottom as CAD1.30 held in September and October as well.  The Slow Stochastics have turned higher, though the MACDs are lagging.  The CAD1.3200 area needs to be overcome to boost confidence that a low is in place.”

“Today's US data is expected to show that headline CPI moved above 2.0% for the first time since July 2014, while the core rate may be steady at 2.1%.  Industrial output has fallen in three of the past four months through November but is expected to snap back 0.6% in December.  If true, it would be the largest gain since July 2015.  Manufacturing itself has fared better.  It fell "only" two of the past four months.  The median forecast of a 0.4% gain would also be the best since July 2015.”

“It is unreasonable to expect Yellen to change her generally upbeat assessment of the US economy in today's remarks.  She speaks again later this week.  The same goes for Dallas President Kaplan, who is a voting member and perceived centrist.   Minneapolis Fed President Kashkari is also voting member but is perceived to be more a dove.”