This week is holiday-shortened for Canadian traders and U.S. bond traders, but it will be highlighted by an interest rate decision by the Bank of Canada, a flurry of economic news in the U.S., and the onslaught of corporate earnings season.

In Canada, the markets will be closed on Monday for the Thanksgiving holiday, and it will be a relatively light week for data after that. RBC Financial says that the focus will be on Wednesday’s Bank of Canada rate announcement along with a glance at August manufacturing data.

CIBC World Markets says that the odds favour no move from the Bank of Canada on Wednesday, “but the chance of a rate cut isn’t really that far below 50% given the increasing monetary tightening coming from the Canadian dollar.”

There is a good argument for the Bank of Canada to lower interest rates, agrees TD Bank. “In particular, in view of the hefty 19% jump in the Canadian dollar in a mere nine-month period, we see the balance of risks on both Canada’s economic performance and core inflation on the downside. Given the uncertainties that remain, further easing would provide some added insurance.”

BMO Nesbitt Burns agrees, but doesn’t expect a cut, noting that, “A number of Bank officials have gone out of their way in recent weeks to indicate that the current level of interest rates is appropriate and that the economic outlook is brightening.” Although, it says that the main arguments in favour of yet another rate cut are: it would help offset some of the restraining impact of the strong Canadian dollar, and with core inflation just 1.5%, there is little risk to another small rate trim. “However, we believe the Bank is more likely to move to the sidelines for now, and assess the sustainability of the U.S. rebound. The last thing the Bank’s credibility needs is to be forced into another rapid 180-degree turn, which could happen if the U.S. economy stays in high gear.”

The only other major Canadian report next week is August manufacturing shipments. “This critical report will flash across the screens just a half an hour before the Bank’s decision on interest rates on Wednesday, and at the same time as the U.S retail sales report for September. However, it is well worth watching in its own right,” says Nesbitt.

CIBC says that the number will be heavily distorted by extended energy-conservation shutdowns after the Ontario blackout. Nesbitt notes that it is looking for a drop in shipments of up to 4% and a 1% decline in orders. “Certainly most of this drop will be recouped in September, but the shock value of a steep decline in manufacturing output could rattle the markets, especially if the Bank then announces it is staying on hold.”

CIBC says that “Above all, traders will be eyeing the Canadian dollar as it sets new multi-year records after the Bank of Canada rate decision.”

In the U.S., the bond market has Monday off for Columbus Day. Apart from that, RBC says that the week features several key releases including retail sales on Wednesday, CPI and the Philly Fed index on Thursday and housing starts on Friday.

But CIBC expects earnings news to dominate. “In the U.S., it’s the peak week for blue chip earnings reports. While we don’t make individual calls, the overall tone to Q3 results should be quite strong; earnings warnings have been atypically light, consistent with the tax-cut-fueled boom in demand. Those results, and foreign exchange momentum plays, will likely trump the economic calendar.”

Nesbitt agrees, saying, “The holiday-shortened week ahead in the States likely will be dominated by the flow of earnings reports. We look for cost cutting to produce more upside surprises.”

As for the data, CIBC says, “September capped a strong quarter for non-auto retail sales and housing. But some of the economy’s soft spots will also be in evidence. The weekly ABC/Money confidence polls suggest no significant improvement in the lowly reading from the University of Michigan for October, and the more qualitative Beige Book should capture the still-lackluster tone in labour markets. CPI gets a bump up from food and energy, but the more stable core rate will remain very benign.”

Nesbitt suggests that the confidence figures have been lagging the improvements elsewhere and this pattern is expected to continue. It says that any further decline in jobless claims “would get the markets very excited about a self-sustaining recovery and lead to substantial problems for bonds.”