US consumer sentiment and Canadian CPI in focus – BBH

The news stream is light and activity is winding down for the weekend as the North American session features the University of Michigan's consumer sentiment survey and inflation expectations, explains the analysis team a BBH. 

Key Quotes

“It will be the preliminary August reading.  Unless there is a large move in sentiment survey, the most important part of the report is the long-term inflation expectations.  Recall that the 5-10 year expectation finished 2016 at 2.3%.  After it rose to 2.6% in January, it eased and as recently as May was at 2.4%.  However, it rose in June and July to return to 2.6%.  It has not been above it since March 2016.”

“Canada reports its July CPI data today.  Headline inflation, which has fallen from  2.1% in January to 1.0% in June, is expected to rise for the first time this year (to 1.2%).  The underlying measures run a little higher than the headline.   Extrapolating from the OIS, market expectations for an October hike (there is a Bank of Canada meeting on September 6, but that is not the focus given the July rate hike) have been very stable around 50% over the past month.   Investors may be more sensitive to a weaker rather than a stronger report.”