07:25 AM EST, 12/02/2024 (MT Newswires) -- There are no major Canadian data releases on deck on Monday, although investors should see monthly auto sales data roll out later in the day, said Bank of Montreal (BMO).

There are also a couple of notable pieces of data later in the week:

-- Labor productivity on Wednesday looks to dip 0.3% in Q3, leaving it roughly in line with year-ago levels. Upward gross domestic product revisions will make history look 'less bad', but that won't undo the negative Canadian productivity story.

-- The merchandise trade report on Thursday will likely show a seventh straight goods trade deficit in October. The bank is estimating a C$1.3 billion shortfall, in line with the previous month.

-- The Labour Force Survey (LFS) on Friday is expected to rise 20,000 in November, not enough to prevent an uptick in the unemployment rate, to 6.6%. The bank pointed out it's been a quirky past couple of months for the LFS, as population growth remained firm, but labor force growth slowed sharply. Combined with modest employment gains, that's led to a steady unemployment rate but plunging participation and employment rates. BMO will also be watching hours worked to see how Q4 is evolving after the mediocre October GDP flash estimate. Finally, wage growth is expected to slow modestly to around 4.5% year over year, still much too strong for the Bank of Canada's comfort.

The Canadian dollar (CAD or loonie) was under pressure early but managed to claw back much of the declines by the end of the week, stated BMO.

Bond yields, however, fell and largely stayed lower. The two- and 10-year yields were both down roughly 30bps, outperforming United States Treasuries handily. Markets are still pricing in about 50/50 odds of a 50bps BoC rate cut on Dec. 11 and expectations for the terminal rate have now drifted below 3% next year, added the bank.

Large and widespread tariffs would be set against a backdrop of firming domestic demand in Canada in areas like housing and consumer spending, but that momentum would be countered in a hurry. BMO judges that the net impact on real GDP growth, without retaliation, would push above 1.5 ppts on a quarterly basis, and could carve 2025 calendar-year growth by roughly 1 ppt -- the bank is currently at 2.0% growth for 2025 and 1.9% for 2026.

While the direct tariff impact would be significant, the bank would also see some offsetting stimulus from likely looser fiscal policy, more "aggressive" BoC rate cuts and a weaker loonie.