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Market Commentary

Another leaky day yesterday on very light volume in the markets, we saw yields creep higher and re-test the support levels.  This morning, it looks like the old guard is coming back.  Strong CAD$ on stronger than expected Canadian trade balance numbers ($5.0B) and weaker than expected US trade balance (-$61.2 B).  The Loonie has spiked higher on this, through the 1.1700 mark, and Canadian bonds are underperforming on this news.  If you'll recall, this was the them for most of 2005 and 2006 - Canadian trade numbers, Loonie and bonds all outperforming the US.  It remains to be seen if this is back to the norm, or a blip on the radar.  Remember that a weakening US$ feeds on itself to weaken the trade balance numbers and raise yields - it is inherently inflationary as imports become more expensive and exports become cheaper for others.


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