Investors await crude inventories report
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Investors await crude inventories report

European markets are expected to open higher on Wednesday after Asian markets rose earlier in the day, with tech stocks gaining after a positive session on Wall Street. U.S. Treasury yields held near multi-year highs ahead of closely watched inflation data this week. A $4.4 trillion market for inflation-linked bonds, also known as linkers, has soared as prices spiral higher amid a post-pandemic world of supply chain glitches and abundant government spending. While currency markets are relatively quiet, the dollar touched a one-month high against the yen, as gains in U.S. yields outpaced those in Japan. 

Canada and U.S. trade deficit

The official data showed that Canada posted a surprise trade deficit in December. Imports surged to new highs, and exports declined from November. However, there is an expectation of an export rebound in January due to surging energy prices. As energy prices continue to rise in early 2022, the trade balance should improve.

The USD/CAD has been trading between 1.2660 and 1.2785 over the past two weeks.

Also, the U.S. Census Bureau reported that the country's 2021 goods trade deficit with China rose by $45 billion, or 14.5%, to $355.3 billion, the largest since a record $418.2 billion deficit in 2018. It also shows China missed its commitment to buy $200 billion worth of U.S. farm and manufactured goods, energy and services above 2017 levels - the year before a bitter trade war erupted between the world's two largest economies.

JPMorgan Estimates bitcoin's fair value

In a note published Tuesday, JPMorgan strategists calculated bitcoin's fair value at approximately $38,000 based on Bitcoin being roughly four times as volatile as gold. Using their estimate, the fair value rises to $50,000 if the volatility differential narrows three times. Given that, the current price is about 12% higher than the fair value.

Events of today

Wednesday doesn't expect much on the data front. Besides inflation data from Mexico, Brazil, Ukraine and Russia, U.S. crude oil inventories will be closely watched. The EIA report is expected to show weekly U.S. crude supplies rose by about 369,000 barrels last week. Data will come after API data showed a surprise drop of 2 million barrels in U.S. stocks last week. Better-than-expected demand may support oil prices while investors widely await the outcome of US-Iran talks in Vienna.