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Daily Market Commentary

  After getting yet another disappointing number in New Home sales for December, which the market largely ignored, this morning's Durable goods surprised sharply to the upside.  This is some of the first positive data we have seen on the economic front for some time.  While this series is notoriously volatile, an upside surprise is psychologically important here.  The markets had gotten to the point where negative news was no longer inciting negative market reactions.  We all know housing is in the dumps, confidence is low, and retail sales are dropping, so when we get positive surprises, the market is looking for reasons to go long.  The yield curve flattens somewhat, the CAD$ strengthens.  We're not ready to say that it's all over, but certainly there is a short term sentiment shift happening.



  The CAD$ has moved firmly to the strong side of par this morning, as the market still expects 50 bps out of the Fed tomorrow, but some risk taking sentiment has returned to the market.  It will be interesting to see the Bank of Canada's reaction here.  With the US slashing rates and widening the gap between our respective overnight rates, a little bullishness coming back to the markets, there could be considerable upwards pressure on the loonie in the short term.



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