Price pressures, which have been obvious for a while, are beginning to show up in official inflation figures. In the US, core PPI was up 2% from last January, well above consensus of 1.1%. In Canada, core inflation was a little more tamed at 1.6% but still above expectations. Also in January, US retail sales blew past expectations on a month over month basis (up 5.3% in one month). The retail sales spike is being attributed to the USD600 stimulus checks which were distributed as part of the last relief package in the US. The USD to CAD rate is up 0.4% on the view that the hot inflation figures and healthy state of the consumer may pursuade Biden to pursue a less expansive version of his stimulus proposal. Also, the inflation figures have firmed up US treasury rates which has in turn made the US dollar more attractive this morning. Stock indices and oil prices are starting the morning slightly to the downside. The market response to the inflation figures has been more muted than one might have expected because the Fed had previously indicated that it expected some transitory inflation. We expect higher than usual volatility today as the market absorbs the latest data.
Account to Account