USD

Markets are little changed this morning as a sense of calm returns after Tuesday’s traumatic reset in rate expectations. The dollar is dropping against most majors, yields are lower, and equity indices are slightly weaker ahead of two critical pieces of economic data – tomorrow’s non-farm payrolls report and next week’s consumer-price index – that could change the monetary policy outlook. In yesterday’s Congressional testimony, Federal Reserve chair Jerome Powell largely repeated Tuesday’s hawkish message, but added cautious qualifiers to soften the blow. “We have not made any decision about the March meeting,” he said, “If — and I stress...

The Bank of Canada held rates steady a few minutes ago, and many homeowners are probably experiencing feelings of relief, hoping for lower borrowing costs and a recovery in real estate values. But James Carville, Bill Clinton’s chief strategist (the important kind of strategist, not the FX kind) famously said: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would want to come back as the bond market. You can intimidate everybody.” If US bond yields keep rising, bank funding...