The USD/CAD currency pair’s losses were pulled back to approximately 1.3600 as sellers continued the three-day decline on Wednesday.

The Loonie pair may have risen due to the stabilisation of the US Dollar, but it may have fallen due to rising oil prices and cautious optimism. People worried about US and Canadian data improved the quote.

The US Dollar Index (DXY) rises to 104.10 after falling the most in a week the day before. The DXY fell on Tuesday due to concerns that the Bank of Japan’s action will reduce Japan’s appetite for US Treasury bonds. Tokyo, which owns the most US Treasury bonds, can invest more in the US. The BOJ stunned markets by changing policy to make it harder for money to leave Japanese bond markets. However, the Yield Curve Control (YCC) band increased from 0.25% to -/+0.5%.

WTI crude oil rose for a third day. As economic downturn fears subsided and China’s stimulus chances increased, it was being bought in small sums near $79.30. However, China had no Covid-related deaths and demonstrated its willingness to address the virus’s economic effects.

As 10-year US Treasury yield rose above 2-year yields, the yield curve inversion that signals a recession became less plausible.

US 10-year Treasury rates touched a three-week high of 3.69%, and two-year bond coupons were close to 4.26% at press time, indicating a positive attitude tied to the USD/CAD pair. Asia-Pacific markets rose after Wall Street ended green. Since 2015, two-year JGB yields have risen over 0%.

The Bank of Canada’s (BOC) Consumer Price Index (CPI) Core for November is predicted to be 6.4% YoY, up from 5.8% the month before, and the US Conference Board’s (CB) Consumer Confidence for December is expected to be 101.00, up from 100.00.

Conclusion

Bond markets will be watched after yesterday’s huge moves.