the myth of synchronised global growth

Loonie bears are feeling the pain

Forex 3 minutes to read
MO
Michael O’Neill

FX Trader, Loonieviews.net

Summary:  Canadian inflation data surprised to the upside and Loonie bears are feeling the pain.


Canada May CPI rose 2.4% y/y, up from 2.0% in April and the gains were broad based. Higher prices for food and durable goods and lower gasoline prices were behind the move. Core CPI rose 2.1%, easily beating April’s 1.5% result.
cpi
Source: Statistics Canada
USDCAD dropped to 1.3340 from 1.3377 and flipped the intraday technicals to bearish with a break of 1.3360, the uptrend line that had been intact since June 10. If support at 1.3340 gives way, it will open the door to a retest of 1.3260 in the coming days. The steep rise in inflation supports the Bank of Canada’s base view for domestic economic growth in the second half of this year. It also dramatically diminishes the odds of the BoC cutting interest rates. The 5.4% rally in WTI oil prices yesterday is also undermining USDCAD even though prices dropped to $53.50 in New York trading.

President Trump continues to play “silly buggers” with financial markets with tweets about China and the ECB in the past twenty-four hours. His failure to deny that he was still contemplating demoting Fed Chair Jerome Powell added another layer of intrigue to the upcoming Federal Open Market Committee meeting. The US dollar is modestly lower from Monday’s New York open in anticipation of dovish tweaks to the policy statement. Powell and company could thumb their collective noses at Trump and issue a neutral statement which would lead to fresh US dollar demand.

Wall Street opened flat. The Dow Jones Industrial Average has gain 1,709 points since the beginning of June and is within spitting distance of its 2019 peak. Traders (and Trump) are hoping the Fed opts for a preemptive rate cut to stave off a slowing economy. However, Trump appears oblivious to the fact that it is his trade wars and disdain for international treaties that are causing the US slowdown.
usdx
Source: Saxo Bank

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.