Data published by the US Bureau of Labor Statistics showed that the Core Consumer Price Index (CPI) in December stayed unchanged at 1.6% on a yearly basis. This reading failed to generate a significant market reaction and the US Dollar Index continued to move sideways.
In the later US session, however, a sudden decline was witnessed in the US Treasury bond yields following the US 30-year debt auction caused the Dollar Index to lose its momentum. With the 10-year US T-bond yield losing more than 4% on the day at 1.080%, the DXY erased most of its daily gains and was last seen near 90.20.
Meanwhile, the barrel of West Texas Intermediate (WTI) is trading with modest losses below $53, keeping the commodity-sensitive loonie’s gains limited against its rivals for the time being.
The biggest tailwind to come is from commodities. Oil will soon become a tailwind for the loonie and that’s especially true of Trudeau can find a way to get the Keystone XL pipeline built. Biden has been quiet on that since the election and there might be a deal to be made. That is a spot to watch in the weeks ahead.
It seems that Canada and Mexico are the big relatively winners of the Georgia runoff. That win ensured a higher level of spending and growth in the US coming out of the pandemic and much of that will spill across the borders.
Trade risks were mostly lowered by the new NAFTA deal but they weren’t eliminated and now the state of play is also much better for both. Some of that has already been reflected in moves in the currencies but the trend will continue.
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