Key Highlights of this week’s article entitled: “The ABCs of the MPR”
The upcoming announcement from the Bank of Canada regarding the Monetary Policy Report has the markets all in a buzz. Avery Shenfeld breaks down what everyone will be looking for and what the near and long term consequences will be.
Key Numbers to watch this week:
· Canada – Consumer Price Index - March (Friday, 7:00AM) – Year-on-year headline inflation should see an increase to 1.8%. New auto prices have been on an uptrend, softened only by discounts being offered by manufacturers to woo back customers.
· US – Durable Goods Orders – March (Friday, 8:30AM) – US durable good orders have been on a clear upward trend since March 2009, however we may see a slowdown as orders for commercial aircraft continues its decline.
· The S&P 500 is finally trading above pre-Lehman Bros levels. As well, 80% of reporting companies have met Q1 EPS expectations. This may be more difficult in Q2 and Q3 if reduced inventory building and fiscal support slow the economy
· For the last decade, the TSX and C$ have followed a very close path, both responding to common driving factors. This is a departure from the 80s and 90s where the currency moved one way when the markets went the other.
· In the non-residential construction market, government stimulus appears to be the dominant force. Private investment has fallen more into capital equipment and machinery, and surveys show this to continue into 2010.
· Only once in the last three decades has the Bank of Canada started a tightening cycle when the output gap was still negative. The C$ may struggle a bit if the Bank takes this into consideration and hold interest rates steady through to the end of Q2.
· Revisions for the Spring Edition of the MPR are expected this upcoming week. If past revisions and the ToTEM model is any indication, future editions may see a drop off of approximately 0.3% to account for the increase in the C$
· The BoC’s Business Outlook Survey came out this past week. Of note is that respondents expect the CPI to stay within the BoC’s 1-3% target.