Morning Minutes

Inflation, Interest Rates, Bank of Canada and Bitcoin In The Spotlight




It’s one of those days where there isn’t one big event but rather a series of smaller events are moving selected markets.

US index futures are steady this morning ranging from flat Dow Futures to a gain of 0.3% for NASDAQ futures. Meanwhile, overseas markets have been sliding overnight with the DAX and the FTSE both falling 0.4% while the Nikkei dropped 0.3% and the Hang Seng slipped 0.1%.

Overnight, China reported mixed inflation numbers with consumer prices increasing less than expected (1.3% vs street 1.6%), but producer prices increasing more than expected (9.0% vs street 8.5%). Investors appears to be looking to tomorrow’s US consumer price inflation report (street 4.7% vs previous 4.2%) for signs of whether inflation pressures have grown enough to increase pressure on the Fed to cut back on stimulus. The US 10-year treasury note yield slipping back down to 1.50% suggests investors are responding to the Fed view that the recent rise in inflation may be transitory and distorted by the big commodity price swings of the last 18 months.

Speaking of commodities, prices are mixed again today with WTI crude oil back above $70.00/bbl and up 0.5%, while copper is down 1.25%. US DOE energy inventories are due at 10:00 this morning. The street is expecting a smaller drawdown this week (-2.0 mmbbls vs previous -5.0 mmbbls), which would be similar to last night’s API report.

With US interest rates falling indicting expectations for a dovish Fed, and oil prices on the rise, the Canadian Dollar is gaining ground on its peers again ahead of today’s Bank of Canada meeting decision and statement which is due at 10:00 am EDT. Canada’s central bank is expected to remain relatively hawkish, continuing with its plan to reduce asset purchases. In the statement, investors may look for comments on how the current round of lockdowns has impacted the economy, the prospects for improvement if and when economies reopen more fully, and any thoughts on the hot housing market.

Cryptocurrencies are on the rebound, this morning after El Salvador announced it is preparing to become the first country in the world to accept Bitcoin as legal tender. On this news, Bitcoin is up 7.0% and trading back above $35,000 while Ethereum is up 3.0% and trading back above $2,500.  

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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