In the European session, we have the German ZEW which is expected to jump to 50.3 vs 26.0 prior amid the expectations of a boost from the fiscal stimulus. In the American session, the main highlight will be the Canadian CPI report but we will also get a few notable US indicators including the Housing Starts and Building Permits, and the Industrial Production and Capacity Utilization.
13:30 GMT/08:30 ET – Canada February CPI
The Canadian CPI
Y/Y is expected at 2.2% vs. 1.9% prior, while the M/M reading is seen at 0.6%
vs. 0.1% prior. The Trimmed-Mean CPI Y/Y is expected at 2.8% vs. 2.7% prior,
while the Median CPI Y/Y is seen at 2.8% vs. 2.7% prior.
Inflation has been
inside the target band for almost a year although we’ve seen a slight uptick
recently as the aggressive easing from the BoC in the past year started to
positively affect economic activity.
The economic data
out of Canada has been picking up before the Trump’s trade war with Canada began but more recently started to weaken as the uncertainty weighed on
consumer and business sentiment.
As a reminder, the BoC cut interest
rates by 25 basis
points to 2.75% as expected last week amid concerns over weaker growth ahead
due to the trade uncertainty and US tariffs. The central bank emphasized a
cautious approach to future decisions, balancing the upward pressure on
inflation against the downward pressure on weaker demand.
Governor Macklem acknowledged the economic uncertainty, and he warned that a
prolonged trade war could slow GDP growth, weaken the job market, and push
inflation higher, creating a difficult policy environment.
The market didn’t
increase much the expectations for more easing by year-end but brought forward
the rate cuts expecting the central bank to offset the negative sentiment amid
the trade war. There’s a 57% chance of another 25 bps cut at the upcoming
meeting with a total of 48 bps of easing by year-end.
This article was written by Giuseppe Dellamotta at www.forexlive.com.