In September, Canadian investment in foreign securities rose to $22.12 billion, up from $19.51 billion previously. This increase shows growing interest in foreign markets. The British Pound is stable against the US Dollar at about 1.3165 as markets await US job data. Meanwhile, EUR/GBP has dropped due to profit-taking and comments from the Bank of England.

Market Movements and Analysis

In the commodities market, gold is steady, trading around $4,000 an ounce without a clear direction. The cryptocurrency market is mixed, with Bitcoin above $95,000 and altcoins like Ethereum and Ripple attempting to bounce back. US economic data will be important next week as it influences market sentiment. Tech companies like Nvidia are being closely watched. The mood in the stock market has calmed, with US stock futures suggesting slight gains after Friday’s sell-off. The report of Canadian investment in foreign securities reaching $22.12 billion is significant. This outflow may indicate a weakening Canadian dollar, a trend seen since large outflows in 2024. We should consider trades that profit from a declining CAD, reflecting a lack of domestic confidence.

US Dollar Dominance

A strong US dollar is currently the primary focus, as the market is less likely to expect Federal Reserve rate cuts. The CME FedWatch Tool shows less than a 20% chance of a rate cut in the next quarter, which supports the hawkish sentiment that developed throughout the inflation battle of 2023-2024. This is impacting pairs like EUR/USD, which struggles to stay above 1.15, and GBP/USD around 1.31. Although WTI crude oil prices are stable at around $85 a barrel, the Canadian dollar isn’t benefiting as it usually does. This indicates that the strong US dollar and capital outflows are overshadowing positive oil trends. The CAD’s response to oil prices has weakened compared to past commodity cycles. Given these trends, buying the USD/CAD pair seems like a wise trade in the coming weeks. With the VIX, a measure of market anxiety, at just over 18, there’s enough concern to consider options. Purchasing call options on USD/CAD could provide potential gains while clearly defining risks in this uncertain market. Outside of currencies, gold is struggling to find direction below $4,100, hindered by the strong dollar and the lack of interest in Federal Reserve easing. Bitcoin, while holding above $95,000, faces challenges due to earlier market corrections in 2025, suggesting that any price increases should be approached carefully. Ongoing risk-off sentiment driven by US monetary policy continues to affect these assets. Create your live VT Markets account and start trading now.

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