Six Events To Watch Next Week

The Japanese economy stagnated in H2 18, and the economy may have contracted in Q1 19. The all-industries index is a proxy for GDP, and after falling by 0.2% in January, it is expected to have fallen by 0.1% in February and will be reported before the BOJ meets. Exports fell for four consecutive months through March. Core inflation, which the BOJ targets, excludes fresh food, stood at 0.8%. It peaked at 1.0% last September and October.

Operationally, the closure of the local markets and settlement for ten days later this month for the ascension of the new Emperor will likely require massive injections of liquidity, which could weigh on the yen. Kuroda wants to project a central bank with tools and will at its disposal, but it seems increasingly exhausted. The BOJ may reduce outlook for exports and production. Trade talks with the US pick up with Prime Minister Abe in Washington at the end of next week with Finance Minister Aso. North Korea's test of a new tactical weapon will likely also be on the agenda. 

Bank of Canada

The neutral stance will be maintained. The economic data is sufficiently mixed to allow the officials to be patient and monitor developments. Extrapolating the overnight swaps index, the market is pricing less than a one-in-five chance of a rate cut in the next six months. Canada faces two immediate economic challenges .First, which is well known, is the housing market in the Toronto and Vancouver regions. The second is that its non-oil exports have fallen to their lowest level in a year, with a 4% decline in February.

Overall, exports are off 6% from the record highs set last July. The new provincial government in Alberta will reverse the current policies and boost the output. Employment growth remains robust, averaging 30k over the past six months, which is comparable to the US adding 300k a month and nearly twice the 12-month average. Consumption has softened, but a gain in February retail sales (0.8% which was twice the median forecast in the Bloomberg survey) snapped a three-month drop.

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Read more by Marc on his site Marc to Market.

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