What a day for risk. USD/JPY rallied aggressively after trading at a 2017 low on Friday and the S&P 500 rose the most since April to close at all-time highs. Other risk-off markets like Gold gapped lower on the open and the US Treasury 10-year yield also bounced showing investors wanted risk over a fixed return. Things look good, at least for today.

This week will provide a lot to chew on in terms of what lays ahead. A lot of focus in the FX has shifted to the UK and Canada. The UK is loaded with data this week. Tomorrow brings the CPI print, which could pressure the BoE into needing to hike rates despite concerns voiced by Carney of a smooth Brexit, lack of business investment, and real wage growth. Traders will not have to wait long to see what the BoE is thinking as they meet on Thursday and to announce the rate (expected to hold), and outlook on policy, which is where most volatility is expected.

Canada has taken the FX world by storm. The difference between the US 2yr yield and the CA 2yr sovereign yield has flipped by 80bps since May. This large shift is responsible for the large move favoring the Canadian Dollar since May and reflects the market’s new view of the Federal Reserve’s outlook and the Bank of Canadas. Currently, the US 2yr yield is yielding less than CA 2yr by ~20bbps. On Friday, USD/CAD traded to 1.2062, which was the strongest since May 2015. Where traders once looked to Oil for direction on the Canadian Dollar, the yields on front-end CA bonds have taken over.

The commodity markets remain a focus for an understanding on risk sentiment, which as mentioned earlier has recently ticked higher. Per the CFTC Commitment of Trader’s report on Friday, managed money extended net long copper exposure to a record 125k contracts. Despite the dip in price on Friday, manager money is looking for further gains, which could be due to China. On Monday, China’s Producer Price Index outperformed and Consumer Price Index beat expectations, which helps to show global reflation is back on track.