CANADA: Carney To Be Sworn In As PM Shortly

Greene still sees case 2 as most likely and risks of case 1 have reduced in favour of cases 2 or 3. This seems quite in line with the Minutes and the wider MPC view rather than being an outright hawk. Highlights below:

• "I still believe we are firmly in a Case 2 state of the world, in which a negative output gap must open to squeeze remaining inflationary persistence out of the economy and return inflation sustainably to our 2%
  target by the end of the forecast period. This motivated my recent vote in favour of a 25 basis point cut in Bank Rate. That said, I think the risks around this view of the world have shifted since the beginning of our cutting cycle last August."
• " I think there are definitely risks that the recent weakness in activity is demand-driven. But the evidence suggests to me that this weakness is more a question of constrained supply. In my opinion, this means the probabilities have shifted away from what we’ve called a Case 1 world towards a Case 2 or 3 world. That is to say it’s less likely inflation persistence will fade on its own accord, and more likely monetary policy will need to remain restrictive in order to either generate a negative output gap to bring inflation to target sustainably or to lean against structural shifts in the economy. As a result, I believe it is appropriate to maintain a cautious and gradual approach to removing monetary restrictiveness."

• Higher yields in the aftermath of the US data are continuing to underpin the theme of renewed JPY weakness overnight. Together with a moderate lift of the lows for the single currency, EURJPY has printed fresh session highs ~159.80 in recent trade, extending the recovery from Monday’s lows to 2.70%.
• While we have noted that the move higher is allowing a recent oversold condition to unwind, the significant reversal and fundamental developments will likely be exerting significant pressure on bearish positions.
• Technically, the latest recovery is likely a correction and initial resistance to watch is 159.93, the 20-day EMA. Key short-term resistance remains further out at 161.09, the 50-day EMA, a break of which would highlight a stronger reversal.

Megan Greene's speech at the Institute of Directors will be published here at 15:00GMT.

• With Mann having switched sides, it is thought that either Greene or Pill remain as the most hawkish member of the MPC. Both have voted for cuts in both November and February and Greene’s speech today will be watched for any evolution of her views.
• Without a notable change in stance at present it seems unlikely her vote is likely to be the one to bring about a potential sequential cut, so if she maintains a hawkish tone it’s unlikely to impact market pricing too much.