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July 7th - CFTC data shows that as of June 30th, global traders bullish bets on the US dollar rose to nearly $40 billion, the highest level since 2015, continuing the dollars monthly rally driven by interest rate expectations. Market bets that the Federal Reserve may maintain higher interest rates or even raise rates again propelled the dollar to a gain of approximately 2% in June. Analysts believe that expectations of Fed monetary tightening and the resilience of the US economy are jointly supporting the dollars performance, but some institutions point out that recent weak employment data may limit further upside potential.Canadian Prime Minister Mark Carney: If negotiations with Germanys TKMS fail, Canada will reserve the right to begin submarine cooperation negotiations with South Koreas Hanwha Group.July 7th - According to CFTC data, as of the week ending June 30th, hedge funds pushed their net short positions in the yen to nearly 138,000 contracts in the futures and options markets, the most pessimistic level since 2007. The yen also fell to its lowest point since 1986, breaking below the 162 yen to the dollar level, triggering market expectations of possible government intervention in the foreign exchange market. The Japanese Finance Minister reiterated that the authorities could take foreign exchange intervention measures at any time, following Japans use of a record amount of funds to support the yen between late April and May. The market believes that the widening interest rate differential between the US and Japan remains the main factor putting pressure on the yen, and even the recent interest rate hikes by the Bank of Japan have failed to reverse the weakness.Israeli officials say that even if the US and Iran reach an agreement, Israel will retain the option of launching a military strike against Iran.The U.S. Commodity Futures Trading Commission (CFTC) reported that traders overall positioning sentiment toward the U.S. dollar has risen to its most optimistic level since 2015.

As oil prices fall and investors become risk-averse before the BOC meeting, USD/CAD rises to 1.3200

Daniel Rogers

Sep 07, 2022 16:50

截屏2022-09-07 上午11.31.45.png 

 

The USD/CAD has risen for three consecutive trading days, and it is currently trading near 1.3190, which is the weekly high. To appease buyers near the highest levels in two months prior to the Bank of Canada (BOC) Monetary Policy Meeting, the Loonie pair has recently been applauding rising rates and a risk-aversion wave.

 

Declining prices of WTI crude oil, Canada's principal export, further strengthen the USD/CAD exchange rate as speculators anticipate the fifth BOC rate hike in 2022.

 

WTI crude oil prices have dropped to their lowest level since late January, down 1.70 percent to $85.40 as of press time on the back of recession worries and a stronger US dollar. Market perceptions of the latest production cut by OPEC and its partners, including Russia, known collectively as OPEC+, could add to the downward pressure on commodity prices.

 

In addition to the covid-related pessimism in China and the European energy crisis, improved US data strengthened the hawkish Fedbets and boosted the US dollar.

 

In the United States, the ISM Services PMI rose to 56.7 from 55.1 and above market expectations. In contrast to initial expectations of 45.0 and 44.1, the S&P Global Composite PMI and Services PMI both fell to 44.6 and 43.7, respectively. Still, following the news, the US Dollar Index (DXY) rose to a new 20-year high. There is now a 72.0% possibility of a 50 bps rate hike by the Fed in September, according to the CME's FedWatch Tool, up from 57.0% the day before.

 

The three-day surge in rates for 10-year US Treasuries to 3.25 percent is the highest it has been since June 15. The S&P 500 futures have also dropped to a new seven-week low, falling 0.55 percent intraday to 3,890.

 

The stronger U.S. dollar, declining oil prices, and reduced risk appetite should keep USD/CAD bulls optimistic despite the BOC's expected base rate increase of 75 basis points to 3.25 percent. Consolidating recent gains may be possible for the Canadian currency, however, thanks to hawkish comments from the BOC Rate Statement and softer Fedspeak.


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