International• Events in recent weeks highlight the fragile stability of European sovereign debt markets. A series of debt restructurings appears increasingly likely.
United States• The minutes from the Federal Reserve’s November 3rd meeting helped explain its decision to engage in quantitative easing; revealing a downgraded economic outlook and continued concerns over the prospects of deflation. While the Fed revised down their economic outlook, actual real GDP growth in the third quarter of 2010 was revised up to 2.5% from a previously estimated 2.0%. October’s data releases for personal consumption expenditure, durable goods orders, and existing home sales set the stage for real GDP growth in the fourth quarter to post a similar reading between 2.0 – 2.5%
Canada• Solid data on retail spending and hotter-than-expected inflation figures has generated a buzz about a resumption in BoC interest rate hikes as early as Q1 2011. Accordingly, 2-year spread in Canada-U.S. bonds widened to a 7-year high, driving flows into the Canadian dollar. While the currency moved lower against its U.S. counterpart, it strengthened broadly against virtually all other major currencies this week.
We believe markets may be getting ahead of themselves in pricing in an early rate hike. Notably, upcoming figures, including the first look on third-quarter real GDP in the upcoming week, are likely to serve up a reminder that trend growth remains sluggish and price pressures remain in abeyance.
There is a lot of changes to keep in mind and an astoute person would take this infomration in good perspective.
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