Bond yields continue to decline around the world

•     Bond yields continue to decline around the world

–    Falling oil prices are pushing down inflation expectations

–    Expectations of QE in Europe plus a shortage of safe European bonds makes buyers ignore prices

–    USD retains a large spread advantage over Europe; likely to support USD

•     US non-manufacturing ISM disappoints expectations

–    But it still shows expansion for 59^th month in a row

–    Employment sub-index was highest on record in Q4 – that’s important for Fed

•     New Zealand milk auction results in higher price

–    But not enough to turn around expectations; NZD/USD still likely to decline

•     Today:

–    Eurozone: preliminary CPI for December likely to show Eurozone fell into deflation = EUR-negative; Eurozone unemployment rate, German retail sales for November

–      Canada:  Ivey PMI for December

–      US: Fed releases minutes from its latest meeting, when it dropped the “considerable time” phrase and replaced it with “can be patient.” Market will want more details on how long “patient” is. ADP employment report for December expected to show an increase in jobs = could be USD-supportive