The stock markets start the week on a mildly pessimistic note with stock indices trading down this morning around the world. The pessimistic mood in stocks is actually a result of increasing bullishness about the state of the global economy. That economic confidence is pushing up bond yields (around the world, including in Canada) and inserting a note of caution for stock investors who have become used to companies having access to endless amounts of financing at very low levels. That same confidence about the future of the global economy is also pushing up commodity prices with oil up more than 2% and now at a 1 year high. All of that is good for the Canadian dollar which continues to trade to hover near multi-year highs. USD to CAD watchers will be focused on two important speeches by central bankers on Tuesday. First up will be Fed Chairman Powell testifying before Congress. Then in the early afternoon Governor Macklem of the Bank of Canada gives a speech. In each case, their reactions (if any) to rising bond yields and firmed up economic confidence will be interesting. In the case of the Bank of Canada, any discussion of the strong Canadian dollar will also be closely monitored, especially in light of recent references to the Loonie in the Bank’s recent releases.
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