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  • US 10-year Treasury yields extend Tuesday’s pullback from March high.
  • Risks dwindle as US political drama intensifies, virus woes escalate in Asia.
  • US CPI, Fedspeak will be important but stimulus updates, covid news become the key.

While portraying challenges to the previous risk-on mood, US 10-year Treasury yields drop 2.8 basis points to 1.112% during early Wednesday. In doing so, the risk barometer marks a daily red candle for the first time since early last week.

That said, in contrast to the US 10-year Treasury yields, stocks in Asia and the S&P 500 Futures trade mixed amid stimulus hope.

Although US President-elect Joe Biden’s readiness to pump the world’s largest economy with heavy stimulus keeps the market players hopeful, recent doubts over the methodology and fears of worrisome balance sheet figures fade the optimism. It’s worth mentioning that the recent chatters favor a stimulus announcement as soon as Thursday.

Also on the risk-negative side is the US political turmoil. While Democrats are firm in winning over the proposal to impeach President Donald Trump, during the second attempt likely on Wednesday, US Vice President Mike Pence recently ruled out any such needs while saying, “I do not believe that such a course of action is in the best interest of our Nation or consistent with our Constitution.”

Elsewhere, the coronavirus (COVID-19) woes are firming in Japan and Malaysia while also challenging the health systems of the UK and Germany. To tame the deadly virus spread, the US Centers for Disease Control and Prevention (CDC) recently announced compulsory coronavirus (COVID-19) testing as well as the negative result for all fliers into the US from January 26.

Looking forward, the US Consumer Price Index (CPI) data for December, expected 1.3% YoY expected versus 1.2% prior, will be the key data to watch. Further, USD/CAD traders may also watch for more cautiously optimistic statements from the Fed policymakers, scheduled to speak during the North American session, while also keeping their eyes on the risk catalysts.