In the US, focus is on CPI inflation. While PCE core inflation (the Fed's target measure) is subdued significantly below the 2% target, CPI core inflation was 2.0% y/y in November. We estimate that CPI core inflation increased to 2.1% y/y in December.
In the UK, the labour market report for November 2015 is due. Wage growth as measured by the annual growth rate in average weekly earnings excluding bonuses (3M average) has been weak in the recent reports and the coming report should not be any different. We estimate wage growth declined from 2.0% in October to 1.8% in November. We expect the unemployment rate (3M average) to be unchanged at 5.2%.
The Bank of Canada's (BoC) rate decision might also attract some attention today. Following the latest oil price rout, markets are now pricing in more than a 50/50 chance of the BoC rate cut. We acknowledge that it is a close call, but we think the BoC will keep rates unchanged today as the weakening of the CAD should do a lot of the rebalancing work. One possibility is that the BoC could re-introduce a form of forward guidance as governor Poloz's predecessor, Carney, pursued with some success in order to anchor rate expectations.
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