Lacker: Brighter economic outlook, falling deflation fears shape yield curve

Commenting of the very steep US yield curve, Richmond Fed’s Lacker says that a brighter economic outlook and easing deflation fears are mostly responsible. Left unsaid (or unreported) is the fear of a dollar decline are a big part of the back-up in yields as foreign investors fear their purchasing power will be eroded. Also crossing the wires are comments from a Canadian finance ministry official that the dollar will remain the global reserve currency for some time. The official also said US consumers will not fuel a global recovery; more demand will have to come from Asia. USD/CAD is well-supported today as the reflation trade unwinds and poor Canadian trade data and hosusing prices undermine the recent Loonie rally. USD/CAD trades at 1.111.

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