ON DECK FOR WEDNESDAY, OCTOBER 21
KEY POINTS:
- CAD underperforming ahead of election risk, data
- Sterling rises on possible resumption of Brexit talks
- US stimulus talks grind on
- CDN retail sales: focus on September guidance
- CDN CPI: is core still rising?
- UK CPI climbs in line with expectations
INTERNATIONAL
Canada’s confidence vote that might determine election risk and ongoing US fiscal stimulus negotiations will be the main focal points today. UK inflation was in line with expectations. Canada will update inflation and retail sales with guidance that will close out Q3 tracking on both measures. Risk appetite is mixed to start off.
- North American equity futures are pushing slightly lower by ¼% on average and with European cash markets slipping by about -1% across the exchanges.
- The USD is depreciating against all major crosses with sterling leading on signs that Brexit talks may resume following Barnier’s appeal to respect British sovereignty, and CAD is relatively underperforming ahead of a confidence vote and data.
- Sovereign debt curves are steepening across the US, UK and Canada with 10s up by 1–3bps while Italian 10 year spreads widen a touch over bunds and French bonds.
- Oil is down by almost 2%. Gold is up by ¾%.
UK CPI climbed to 0.5% y/y (0.6% consensus, 0.2% prior) with core CPI rising to 1.3% y/y (1.3% consensus, 0.9% prior). The prior month’s distorting effects of a targeted VAT tax reduction and the end of meal rebates combined with less downward pressure on airfare to drive this.
CANADA
Canada’s confidence vote is scheduled for approximately 3:15pmET. Recall that the opposition Conservatives have led a push to establish a probe into the government’s pandemic responses including the WE Charity scandal. The Liberal minority government has taken the highly unusual step of making it a matter of confidence in the government; the government is seeking to quash public inquiries into WE Charity and pandemic responses by threatening an election call that opposition parties may not be prepared to fight and with an eye on the current polls (chart 1). Barring a deal with the NDP, election risk hangs in the air. An election would have to be held within 36 to 50 days after dropping the writ which would mean an election would be held sometime between November 26th and December 10th.
Canada will update CPI for September and retail sales for August this morning (8:30amET).
We already have guidance from StatsCan on retail sales (+1.1% m/m). We will also get the preliminary estimate for September which will be the main new information.
CPI is expected to climb by 0.5% y/y (0.1% prior) and to slip in NSA terms by 0.1% m/m. The main drivers are base effects and usual seasonality, as gas prices offered little change this month.
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