The final week of June has a couple of big macroeconomic data releases in Canada, noted Bank of Montreal (BMO).
At the top of the list is the May consumer price index (CPI) on Tuesday, at 8:30 a.m. ET, said the bank. When the Bank of Canada (BoC) cut rates by 25 bps earlier this month, Governor Tiff Macklem opened the door to a follow-up move in July if there is further progress on the inflation front.
BMO is looking for a 0.3% monthly increase in headline inflation, and 0.2% for the Trim and Median cores, which will keep the yearly rates constant for all three metrics. That's not especially "encouraging," but still likely good enough to keep a July rate cut in play.
Investors will get one more inflation report (for June) ahead of the next policy announcement.
The other major release this week is the April gross domestic prodcut (GDP), out on Friday. The bank is looking for a "solid" 0.4% m/m increase, a tick better than the flash estimate. Manufacturing, wholesale and retail activity all picked up in the month, while hours worked rose strongly as well. That would be a solid start to Q2, and if the May estimate is a small positive as BMO expects, there's a "solid" chance the bank will be upgrading its growth forecast for the quarter.
Other data this week include: the May manufacturing sales flash estimate on Tuesday, the May wholesale trade flash estimate on Wednesday, and the April survey of employment, wages & hours (SEPH) on Thursday.
BoC Governor Macklem speaks before the Winnipeg Chamber of Commerce at 1:45 p.m. ET on MOnday (text of the speech will be out at 1:30 p.m. ET). The topic of the speech is "Workers, jobs, growth and inflation-Today and tomorrow". BMO will be listening if the governor has any further thoughts on the potential pace of easing and divergence from the United States Federal Reserve. A press conference will follow at 3 p.m.
The Canadian dollar (CAD or loonie) was modestly firmer last week, finishing just below C$ 1.37. Softer US retail figures weighed on the US dollar (USD), while some viewed the BoC's minutes as a bit less dovish (BMO didn't see anything new) supporting the loonie. Notably speculative positioning remains heavily skewed short CADs, which suggests it will be challenging to get material weakness from here barring a shock, stated the bank.
The Government of Canada (BoC) bond yields were 5-to-6 bps higher across the curve. The long end outperformed a touch despite continuing to be rich on the curve and extremely rich versus US Treasuries (UST), according to BMO. Indeed, the long end was the only part of the curve that didn't underperform USTs.
This week's top-tier data points will be keenly watched by markets, with the US data likely playing a secondary role until the PCE figures on Friday.
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