November Producer Price Index to be released at 08:30
FX Action: USD-CAD accelerated to a two year high FX Action: USD-CAD accelerated to a two year high at 1.0628 after finally taking out the July peak at 1.0608, on track to test the October 2011 peak at 1.0657. The pair dipped initially on the firmer than expected GDP data this morning. But risk lingers that the BoC will soften its stance still further next week, mindful of inflation that has persistently undershot its target. Notably, the CD Howe Institute's MPC has recommended that the Bank add forward guidance, "indicating willingness to lower interest rates should the disinflationary output gap in the Canadian economy not close as fast as expected, and should inflation look likely to stay below target longer than expected."
U.S. Manufacturing ISM Preview U.S. Manufacturing ISM Preview: The November ISM will be released on Monday and analysts expect the headline to ease to 55.0 after an increase to 56.4 in October. Other measures of producer sentiment for November have all declined thus far with larger than expected declines in the Empire State and Philly Fed but a smaller than expected decline in the Chicago-ISM.
Treasury Action: Treasuries have largely erased losses and are flat Treasury Action: Treasuries have largely erased losses and are flat on the day and pretty much for the week. Month-end buying has helped the bonds recover with the 30-year yield falling to 3.81% and the 10-year at 2.74%. Trading has been typically light following the holiday. And the market has held inside a narrow range with no data or events to drive action. Volume will pick up next week and a heavy data, Fedspeak calendar could revive volatility. Many are looking for the curve steepening trade to re-emerge into the December 17, 18 FOMC meeting. Meanwhile the Dow is in record territory.