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In Canada, the highlight of the week will be the central bank’s monetary policy meeting and with its three core inflation measures well centered around two percent, it could be said that the Bank has a green light to proceed with further policy normalization, suggests the research team at NBF.

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“Only five weeks ago, the BoC was of the opinion that there were still elements of excess capacity in the labour market. It is hard to imagine that April’s weak job report (-1.1K) could have pushed the Bank in changing its view on that subject. Add the still ongoing NAFTA negotiations to the list of uncertainties and chances are the Bank will leave its policy stance unchanged.”

“The week will also see the release of statistics on first quarter GDP. Monthly readings to date hint at a positive contribution from business investment based on already-released data on non-residential building construction, although investment in machinery and equipment could disappoint based on soft imports. Alternatively, trade likely weighed on the quarter’s total output, as imports expanded in the face of stagnating exports. Residential construction and consumption, for their part, are unlikely to contribute much to growth if housing starts and retail sales data are any guide. All in all, we’re expecting Q1 GDP growth to come in at around 1.9% in annualized terms.”

“Looking at monthly data, the handoff to Q2 looks promising, with March GDP on pace to expand 0.2% m/m, courtesy of gains in retail, manufacturing and resources.  On Wednesday, balance of payments data for the first quarter should show the current account deficit widening to about C$18.2 billion, led by a deterioration of the goods trade balance. We’ll also keep an eye on the release of Markit’s manufacturing PMI for May.”