The Canadian dollar is the best performing major ‘risk on’ currency this year. Against the US dollar, the loonie is down by 4.5% this year. This beats all other major ‘risk on’ currencies including the euro (-5.3%), British pound (-5.9%) and the Australian dollar (-6.9%). In our last commentary, we argued that the outlook for the Canadian dollar was neutral thanks to rising crude oil prices and …

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While the outlook for the Canadian dollar looked dire just a few months ago, the currency appears to have recently turned a corner. After looking oversold in late March, the currency managed to strengthen thanks to a rebound in crude oil prices. Two weeks later, the Canadian dollar received more good news as the Trump administration pushed to conclude NAFTA talks at a faster pace. In more recent …

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Looking at last week’s Commitment of Traders report, the only notable changes were relating to net positions in the Swiss franc, Canadian dollar and British pound. Changes in positioning were fairly limited for the US dollar, euro, gold and crude oil. Crude oil positions, based on 3-year trailing averages and net speculator positions as a proportion of total open interest, remains at a bullish ex…

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When will the Canadian dollar rebound? We take a closer look at the Canadian dollar and what the latest Commitments of Traders report says about the currency. Bank of Canada remains cautious - impacting trader optimism, but better data has us rethinking an earlier prediction.

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Expectations for today’s Bank of Canada rate decision are low – consensus expects rates to be maintained at 1%. Thus the real driver for the currency will be in the Bank’s statement. Last October, the BoC said that the “Governing Council will be cautious in making future adjustments in the policy rate”. Markets focused on the word “cautious”, believing that the outlook for further hikes in 2017 w…

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CAD forecast: forex investors have reason to be cautious about the Canadian dollar. Changes in crude oil and real estate prices indicate a coming reversal of fortune.

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Looking at the latest COT report, extremes this week include crude oil and a new bearish extreme in the Swiss Franc. While long Canadian dollars looked like an extreme position last week, this is no longer the case today. Notable extremes are bolded, and are highlighted when speculator positioning is more than two standard...

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Ever since both crude oil prices and inflation expectations bottomed last summer, our view on inflation has become more bullish. Crude prices look set to keep rallying for the rest of the year, while inflation expectations can keep rising thanks to tax reform hopes. Given the Canadian dollar’s historical correlation with crude oil, the currency is likely to be supported by rising crude prices. On…

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In the past few quarters, economists have made abundant use of the phrase ‘globally coordinated growth’. The idea is that the world is currently experiencing a unique era, whereby major economies (including the US, Eurozone, Japan, and emerging markets) are experiencing strong growth rates at the same time. Many have pointed to aggressive monetary policy as the likely cause, given that the past f…

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The Bank of Canada has been full of surprises this year. In our previous take on the BoC’s last interest rate decision in September, we remarked that Governor Poloz likes to keep markets on their toes by incorporating an element of surprise in his announcements. Judging by the outsized reaction in USD/CAD and EUR/CAD last night, markets were clearly not expecting the BoC to dampen expectations fo…

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