The Consumer Price Index (CPI) core in Canada rose from 2.8% to 2.9% year-over-year in October. This indicates a minor increase in inflation pressures within the Canadian economy. In financial markets, silver prices are slightly up but still below the $51.00 level. The British Pound is stable around 1.3165 as traders await important US jobs data.

Bitcoin and Altcoins Recovery

Bitcoin is trading over $95,000, showing signs of recovery in a market that has seen significant sell-offs. Altcoins like Ethereum and Ripple are also trying to bounce back, with Ether (ETH) priced below $3,200 and XRP around $2.27. US stock futures indicate small gains following a steep drop, while European stock index futures remain flat. Chainlink is holding above $14.00 as cryptocurrency markets recover, though retail interest is declining. The latest Canadian core inflation rate of 2.9% is crucial. It highlights the Bank of Canada’s challenges in bringing inflation back to its 2% target. This struggle has persisted since the inflation spikes of 2023 after the pandemic. As a result, the chances of the Bank of Canada cutting interest rates soon are much lower.

Canadian Dollar and Derivatives Trading

For those trading derivatives, ongoing inflation reinforces a positive outlook for the Canadian dollar. We can expect less volatility in CAD-related options as the central bank’s direction becomes clearer, making it easier to position for a stronger loonie. This is a good time to consider strategies that benefit from high interest rates, like selling out-of-the-money puts on the CAD or starting bull call spreads. This situation in Canada differs from the United States, where markets still anticipate a Federal Reserve rate cut, despite officials showing hesitation. Historically, the Fed has kept its key rate above 5% for an extended period. However, recent manufacturing PMI data indicated a contraction, increasing market speculation about a change in policy. This difference in approaches between the steady Bank of Canada and a potentially wavering Fed makes long CAD/short USD positions appealing. The overall market conditions support this perspective. Weakness in the Euro and British Pound is driving investment towards North American currencies. Additionally, stable oil markets, with WTI crude prices around $85 a barrel, provide a boost to the Canadian economy. This situation makes pairs like EUR/CAD interesting for bearish strategies, capitalizing on Canadian strength and European economic weakness. Create your live VT Markets account and start trading now.

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