Canada's September employment report to show a 15K gain, following 12K in August

The September employment report to show a 15K gain, following 12K in Aug (cons 10K). The goods sector should reverse the loss in August, while the service sector should continue to see steady growth. A 10K rise in the labour force should see unemployment tick down to 6.9% after last month's surprise jump from 6.8% to 7.0%. 

We also get an updated look at business conditions in the BoC's Q3 Business Outlook Survey (BOS). The report covers the mid-Aug to mid-Sept period, which saw lower GoC yields and weaker CAD but lower oil prices relative to the Q2 BOS. With business fixed investment lagging, the key measure to watch is the balance of opinion on investment in machinery and equipment, which has been in single digits for the last three reports (+7 in Q2). Inflation expectations over the next 2yrs are also worth a look. Markets have unpriced the risk of a cut almost entirely (now only -5bps discounted out to the April meeting) so the risks are asymmetric to the downside for CAD. 

Governor Poloz also speaks this weekend on "Integrating Financial Stability into Monetary Policy". The BoC released a discussion paper for this last Monday. Three take-aways from the paper: (1) macro-prudential regulation and monetary policy cannot be looked at in isolation, (2) low rates for an extended period can encourage risk-taking but financial system risks must be looked at in the context of overall economic benefits and (3) leaning against imbalances (e.g. raising rates to counter increasing debt) may actually lead to a worsening of debt-to-income ratios, depending on households' response. Overall it is consistent with previous BoC speeches showing a bias against using monetary policy to fight financial stability risks (and giving room for further cuts in Canada if needed).