Canadian inflation leaves much to be desired

The loonie’s underperforming heading into Friday’s trading session as inflation figures missed expectations. Annualized CPI rose by 1.4% which, while still picking up from the prior month, fell below forecast by 0.1 percentage points. To make matters worse, retail sales excluding autos missed target also, lifting USD/CAD back above 1.23. While the ramifications for the Bank of Canada may be somewhat limited from just one month’s data, it may mean that the Bank’s rate-setting committee are forced to pause for thought before another rate hike.

May up next

UK Prime Minister Theresa May is due to speak any minute now to EU leaders in Florence, Italy to reinvigorate the stalled Brexit negotiations between the UK and the European Union. Theresa May will give an ‘update’ on the stance and path of the negotiations. The tightrope that she has to walk is to signal to her Brexiteer ministers and party members that she has not ceded ground and ‘sold out’ the leaver dream while also telling Europe of progress that will trigger the beginning of trade talks.

It’s been widely expected in the press that May will ask for a two year transition or ‘implementation’ period to avert the prospect of a cliff-edge Brexit in March 2019, while also paying a ‘divorce’ payment of around €20 billion.

Germany and New Zealand to opt for the status quo

Both the German and Kiwi electorate take to the polls this weekend to decide on their future political leaders and both electorates are expected to favour the incumbent: Angela Merkel for Germany, and Bill English for New Zealand. Like most, we anticipate a clear win for Angela Merkel and her CDU party. We have always believed that the threat to Angela Merkel was rather overstated and while we see Merkel’s CDU/CSU party winning out in the end – on the basis of a ‘steady hand’ amidst issues of a continued Eurozone crisis, Brexit and growing Russian influence – it will be the AfD, the UKIP of German politics, who may be viewed as the ‘winners’ should they finally get representatives into the Bundestag.

In New Zealand, the Labour opposition has staged a formidable campaign and gained some serious ground over just the past few weeks. Nonetheless, the conservatives are expected to keep power for another term and keep the NZD from posing too much of a problem when the market reopens on Sunday.

Have a great weekend.