The Bank of Canada kept its benchmark rate on hold as expected at 5.0% yesterday but noted that inflationary risks have increased and indicated that it is prepared to hike rates further if needed. At the same time the bank lowered growth forecasts for this year and next, with Governor Macklem saying the path to a soft landing in Canada “is narrower”.
New home sales in the US surged to 759k (12.3% annualized) in September, the fastest pace of growth since early 2022, and much higher than the market had expected. With a lack of supply, most transactions were for new homes as developers have offered incentives to buyers facing the highest mortgage rates in a generation. The data is volatile however, and it remains to be seen if the pace of home sales growth can be maintained the face of high financing costs.
United Auto Workers (UAW) has reached a tentative agreement with Ford which will see hourly wages rise 25% over the new contract, which exceeds four years. Union leadership will vote on the deal over the weekend, and it must then be ratified by members in a process that could run for several weeks. Workers are expected to return to factories during the ratification process. GM and Stellantis are set to meet UAE today to continue talks.
Republicans elected a new speaker of the House, Mike Johnson, more than three weeks after Kevin McCarthy was ousted. Johnson’s immediate priority will be to avert a government shutdown on 18 November.
Germany’s IFO business climate index improved slightly to 86.9 in October from 85.8 in September, with both the current assessment and expectations indices coming in ahead of forecasts. The data suggests that the Eurozone’s largest economy may be stabilizing even as a recession is expected this year. The services sector appeared to be the main driver of improvement in the survey released yesterday, as manufacturing remains under pressure from weaker demand in China.
Today’s key economic data and events
15:00 Central Bank of Turkey monetary policy meeting, forecast +500bp to 35%
16:15 ECB rate decision (main refinancing rate) forecast 4.5%
16:30 US GDP (Q3) forecast 4.5% annualized.
16:30 US durable goods orders (Sep) forecast 1.8%
18:00 US pending home sales (Sep) forecast -2.0% m/m
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