CAD flows: Stronger CPI CAD supportive

The stronger than expected Canadian CPI data triggered some gains in the CAD, but they have only been modest, even though Canadian yields have risen against a background of somewhat lower yields elsewhere. This reflects the fact that spreads were starting from levels that were consistent with a slightly higher USD/CAD, and a generally more risk negative market tone which is normally CAD negative.  Nevertheless, if we see a more negative tone develop further, the likely decline in US yields that might result may well more than offset any tendency for the CAD to suffer in more risk negative conditions, especially since speculative positioning in USD/CAD is so extreme.