USD/CAD flows: Inflation expectations, Fed Waller
Fed's Waller highlights inflation expectations as UoM figures revised notably higher
Keeping US fixed income on the backfoot and dollar supported
Much of it ultimately comes down to Iran of course but the news flow still keeping US fixed income on the backfoot and the dollar firm. Final Michigan consumer confidence saw notable upward revisions and pick ups in both 1yr and 5yr inflation expectations, albeit with damage to consumer confidence also being felt as a result.
In that context, Fed’s Waller says would not hesitate to support a hike if inflation expectations start to become unanchored, while also underscoring that the easing bias should be removed. Outlook of course remains very dependent on Iran path ahead but for now 6mth OIS up another couple of basis points and back towards the March highs. Canada retail sales meanwhile negative in real terms though still firm over the quarter. USD/CAD back above 1.38 and testing 61.8% retracement of the Apr-May drop, in the wider range up to 1.4~.