What to watch this week at home and abroad

Here’s what to watch this week in the economy, both at home and abroad.

Bank of Canada speech. Governor Stephen Poloz speaks on Wednesday in St. John’s, Newfoundland. His topic, “The meaning of data dependence: An economic progress report,” suggests he’ll provide insight on criteria for further rate hikes and their timing.

Read: Inflation inches closer to BoC target in August

Expect “a stronger emphasis upon the conditionality of hiking again after material data has been gathered,” says Derek Holt, vice-president and head of capital markets economics at Scotiabank, in a weekly economics report. He calls the speech a “rate hike scorecard” in a daily report released today.

Read: What an interest rate rise would mean for prescribed loans

July GDP. On Friday, StatsCan releases monthly GDP results. With a decline in manufacturing volumes and unimpressive retail trade results, “July GDP will have to thank a strong result from wholesale trade for keeping it in the black,” says Nick Exarhos, director at CIBC World Markets, in a weekly economics report. He expects GDP growth to be 0.1% month-over-month, which leaves a year-on-year advance of close to 4%, he says.

Read: We’re No. 1: OECD ups Canada’s growth to best in G7

Likewise, Holt expects growth in the range of 0.1% to 0.2% month-over-month.

“If a 0.2% estimate for July GDP growth is on the mark, then that could lift quarterly tracking to about 2.5%,” he says. Maintaining modest growth after “a torrid pace” of growth in Q2 and on average over the past four quarters “would likely be good enough to the BoC,” he says.

U.S. data. Further detail is expected this week on proposed U.S. tax reform, says Holt, and there will be several speeches from the Federal Reserve, including Chair Yellen’s keynote address on Tuesday to business economists.

U.S. data releases this week include durable goods orders, on Wednesday.

“A healthy, if not spectacular, durable goods reading will be enough to suggest that business fixed investment in the U.S. still has some wind behind its sails after a strong start to the year,” says Royce Mendes, director and senior economist at CIBC World Markets, in an economics report. He adds that CIBC is too close to consensus to see much market reaction.

Read: Get choosy with U.S. consumer stocks

International. “Political risk is the main focal point in this morning’s markets following elections in Germany and New Zealand and with a snap election call in Japan,” says Holt in today’s economics update. “Other developments are muted by comparison.”

In Germany, Chancellor Angela Merkel was re-elected, but with only about 33% of the vote. In New Zealand, the ruling National Party won the biggest share of the vote as expected (46%), but not enough to form a majority. That means it must negotiate a coalition arrangement with the right-wing New Zealand First party to keep the Labour Party out of power after it got about 36% of the vote.

Because of Germany’s and New Zealand’s elections, Holt notes that the euro and related currencies, along with the New Zealand dollar, are the weakest performers versus the U.S. dollar. In contrast, the loonie is holding its own and outperforming most other currencies.

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