[Jason_Lim]

Following the surprise rate hike in Australia, money markets in other ‘commodity countries’ have moved swiftly to price in a greater risk of monetary tightening. Granted, the Canadian market is still taking a relaxed attitude about the next Bank of Canada (BoC) meeting on 20 October, expecting rates to be kept unchanged at 0.25%. However, expectations for the next 12 months have moved sharply – to a total of 111bps of rate hikes on 13 October from 72bps on 2 October. Given the recent stabilisation in Canadian economic data – and the notable improvement in jobs, in contrast to the US – markets may well become even more hawkish in the short term. This week, we have August new housing price data later today, followed by August new motor vehicle sales on Wednesday and August manufacturing sales on Thursday. The key data release this week is September CPI on Friday. The market consensus for this is 0.1% m/m and -0.9% y/y, vs. 0.0% m/m and -0.8% y/y in August. The market expectation for the BoC’s core CPI number is 0.2% m/m and 1.4% y/y, vs. 0.1% m/m and 1.6% y/y previously.