The Canadian dollar is up 0.2% against the US dollar this morning but there is little conviction in the move and things could change quickly during the course of the day. The focus continues to be on bonds and market interest rates. Yields were up in an orderly fashion overnight but have retreated this morning. The issue is that the bond market has come to doubt central banker assurances of ongoing monetary stimulus given that the economy is performing better than expected and vaccination are proceeding in reasonable fashion. Fed Chairman Powell will likely try to convince markets that it will hold the status quo for a while in a speech in the early afternoon. If Powell does not meet the market’s expectations by providing firm reassurance that the Fed intends to retain loose monetary policy for the foreseeable future, expect a sell off in stocks, a rise in yields and a decline in the Canadian dollar. USD to CAD will also be paying close attention to a series of economic data points to be released tomorrow morning, including Canadian balance of trade and PMI data and US employment figures.
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