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Scotiabank analysts see signs that the Canadian Dollar’s weaker performance is stabilizing above 1.37.
The Canadian Dollar is showing some weakness, with losses likely stabilizing above 1.37. Meanwhile, the USD is trading above its estimated fair value of 1.3630, indicating that it could gain more.
The Bank of Canada’s recent announcements highlight concerns about ongoing inflation and uncertainty surrounding tariffs. Despite a slowdown in the domestic labor market, the Bank is not hurrying to lower interest rates, much like the Federal Reserve.
Interest rate expectations stay stable as central banks await more economic data and remain neutral
The market is waiting for new economic data and important developments. Predictions for rate cuts by the end of the year include 47 basis points from the Fed (with a 99% chance of no change in the upcoming meeting) and 25 basis points from the ECB (91% chance of keeping rates steady). The BoE has a 58% chance of a 49 basis point cut, while the BoC expects a 25 basis point cut with a 78% chance of maintaining current rates. The RBA anticipates a 70 basis point cut, with a 64% likelihood of that happening, and the RBNZ expects 27 basis points, with an 82% chance of no change. The SNB is forecasting a 15 basis point cut with a 53% likelihood.
As for rate hikes, the BoJ is predicting 14 basis points but has a 98% chance of no change at its next meeting. This week featured monetary policy announcements from central banks, including the BoJ, Fed, SNB, and BoE. Interest rate expectations have remained unchanged as banks stay neutral, awaiting more economic data. As a result, market volatility has been low during this uncertain period.
Current Market Conditions
Currently, market participants are mostly waiting for macroeconomic updates. Many central banks are being careful, not because they disagree, but because the data hasn’t shown a clear direction yet. Most have confirmed their neutral stance, including those previously considered dovish or hawkish. This indicates they are closely monitoring the data, and we should too. The Federal Reserve is expected to cut rates by around 50 basis points by December, suggesting growing yet tentative confidence in lower inflation. There’s a 99% chance rates will stay the same at the next meeting, so no surprises are anticipated in the near term. However, shorter-term instruments are increasingly hinting at a more dovish stance, reflecting cautious positioning ahead of payroll and CPI reports. In Europe, policymakers are taking a similar approach. The European Central Bank is forecasting around a 25 basis point cut by the year’s end. With over a 90% chance of keeping rates steady at the next meeting, any changes will depend on new inflation and wage data. They seem hesitant to act before the data arrives, which is wise given the mixed signals in recent reports. The Bank of England is showing some variability, and their likelihood of easing is just above 50%. However, the anticipated magnitude suggests that once the first move is made, more could follow. While it’s not a steep trend, it’s more pronounced than others, so we should watch for front-end steepeners or short-dated volatility since the BoE may be the next major bank to break ranks.Global Economic Positioning
Canada appears quite stable. With nearly an 80% chance of keeping rates steady at the next meeting and only 25 basis points expected by year-end, traders seem to believe the risk of rising inflation is low. Short-term overnight index swaps reflect a steady expectation, indicating balanced Canadian risk currently. On the other hand, Australia is positioning differently. They are pricing in 70 basis points of potential cuts, and there’s a two-thirds chance a cut could happen soon. This aggressive stance is notable among developed markets. The gap between expected easing and ongoing inflation issues may create two-way risks, so it’s wise to review hedging strategies for Australian front-end instruments due to the asymmetric risk from recent price movements. New Zealand is in a middle ground. With a nearly 30 basis point rate cut priced in and over an 80% chance of no change at the next meeting, local economic challenges haven’t significantly affected policy expectations. The current probability suggests little movement ahead, making local curve shifts unlikely unless commodity data diverges clearly. Switzerland’s figures are modest. There are only about 15 basis points priced in, with probabilities almost randomly distributed. The Swiss National Bank hasn’t given much guidance, which has kept volatility among the lowest in the G10. Their focus seems more on managing currency than on rates, given the recent trading behavior of the Swiss franc. Lastly, Japan is moving in the opposite direction. They are seen as likely to increase rates in the future, with about 14 basis points priced in. However, the crucial figure is the 98% chance of no action at the next meeting. This indicates that the Bank of Japan’s recent hike was not a shift into a series of hikes but rather a reset. Longer-term positioning remains relatively stable, meaning yen strength isn’t yet supported by rate trends. The key takeaway is that central banks are holding back, but their silence tells us much. The probabilities offer a guide, but economic surprises will be the real game-changers. If inflation or labor data strays from current expectations, the market could react quickly. Front-end gamma may still be undervalued in some areas, especially where rate cuts are already partially expected. We recommend closely monitoring wage data and longer-term inflation expectations, not just headline CPI, as they will likely influence rate movements in the future. Create your live VT Markets account and start trading now.EUR/USD pair recovers to 1.1485 after hitting a weekly low of 1.1445
Safe Haven Assets Boost Dollar
The ongoing conflict has led investors to seek safe haven assets like the US Dollar. Iran has issued warnings against US military actions, which has heightened global tensions. The Federal Reserve has updated its growth forecasts, lowering the GDP prediction for 2025 from 1.7% to 1.4%, while increasing PCE inflation expectations to 3%. Recent US economic data shows a slowdown, while inflation in the Euro Area remained unchanged in May. The EUR/USD fell below a crucial support level, signaling a bearish trend. The pair is now testing support at 1.1450-1.1470, with further declines expected, while resistance is at 1.1530. As the Dollar continues to gain strength, thanks to Powell’s firm stance, traders may need to rethink their investments tied to the Dollar, especially due to safe haven demand. Powell’s comments, along with the Fed’s cautious approach to monetary policy, suggest that changes in interest rate expectations are likely to happen slowly, unless there are significant drops in inflation data. Notably, the Fed’s decision to keep rates steady while hinting at potential cuts later this year has provided short-term support for the Dollar. This signals a less dovish outlook than many expected.Euro Struggles Amid Tensions
In Europe, the EUR/USD is failing to maintain its position above 1.1500 and is currently struggling around 1.1485. This suggests growing downside pressure. This decline is influenced by both the Dollar’s strength and stagnant inflation data in the Euro Area. As a result, traders should adopt stricter risk thresholds on long Euro positions until more clarity on regional price trends emerges. The support level around 1.1450–1.1470 is crucial. If this level breaks with momentum, technical selling could push the pair down, likely targeting the 1.1400 area in the near term. Furthermore, news surrounding tensions in the Middle East is impacting trading across various asset classes. The US President’s mixed signals about potential intervention are driving tactical moves in favor of the Dollar. As a result, Gold and Treasuries have gained interest; however, the focus here is on the ongoing shift toward lower-risk assets, rather than just a reaction to the headlines. Traders should stay flexible, especially as weekends approach, when unexpected events or military developments could catch risk-seeking trades off balance. Create your live VT Markets account and start trading now.The Bank of England keeps interest rates at 4.25%, while some members call for a rate cut
The Bank of England has kept the bank rate steady at 4.25%, as expected. This decision came from a 6-3 vote. Members Dhingra, Taylor, and Ramsden wanted to lower the rate by 25 basis points. UK GDP growth remains weak, and the labor market is loosening. Inflation risks are seen as two-sided.
A careful approach to easing policy is deemed suitable. The path of monetary policy can change and will be reviewed at each meeting. Current restrictions will continue until inflation risks move closer to the 2% target.
A rate cut in August may be possible, depending on upcoming data and global circumstances. The statement is similar to previous ones, with “two-sided risks” to inflation supporting the choice to pause. After the announcement, the pound dipped slightly from around 1.3428 to 1.3416, hitting a low of 1.3405 briefly.
With this decision, it seems the Bank is patiently observing. They are maintaining current conditions while leaving the option open to ease in the near future if necessary. The split in the committee, with three members wanting a cut, suggests there may be growing support for lowering rates, even if it’s not yet strong enough to act on. This disagreement is significant, showing us where individual preferences lie.
The economy hasn’t shown strong growth. Its flat growth offers little to counter the softening labor market. Hiring is slowing down, and wage increases are stabilizing rather than speeding up. Supply and demand pressures appear to be easing. However, price growth remains high and inconsistent, which is why caution persists.
Inflation risks are balanced, which is important. Decision-makers are clear that both upward and downward risks exist, affecting how we position ourselves. In summary, we should be flexible, not fixed.
Market reactions have been calm, though slightly dovish. Sterling weakened a bit after the announcement—a minor adjustment in future rate expectations—but the change was short-lived. Volatility did not increase significantly. Yields adjusted to reflect a more accommodating stance over the medium term, particularly as we approach year-end, but expectations depend on data.
It’s crucial to focus on potential surprises. The decision for any shift in August hinges on three main factors: inflation rates, wage trends, and service sector output. Each could change before the next rate meeting, clarifying how far the Bank will go. No single data point might trigger action, but the overall sequence will be important. Sharp disinflation or lower wage growth could push the committee towards a dovish stance.
We should note that the tone of policy guidance has not changed—the Bank is committed to maintaining restrictions until evidence shows prices are closer to the target. This perspective is based on data. Unlike previous tightening cycles, forward guidance is uncertain, which gives us some leeway. There won’t be automatic adjustments; everything now rests on the data leading up to August.
Volatility in markets might remain stable in the short term but could change quickly if inflation drops sharply or if geopolitical risks arise unexpectedly. It might be wise to consider lower rate structures with flexibility to adjust, especially through intermediate expiries. Flexibility is preferred here. If easing accelerates, near-term steepener curves may reassert, but further movements will depend on growth trends.
While the majority remains firm, the voting lean indicates growing unease. What matters is this lean, rather than just the numbers. The dissent from three members shows an emerging willingness—though not yet a consensus—to counterbalance falling growth with earlier actions. We will closely monitor any changes in stance during upcoming testimonies and minutes. Adjusting language could significantly shift our perspective.
At the short end, expectations are cautiously firming for a summer move. In August, we’ll see if more than three members are ready for that step. Data will determine this. Until then, we’ll stay balanced. We suggest viewing duration strategically and positioning for responsiveness rather than trying to predict outcomes.
US Dollar strengthens and then retreats amid reports of potential US strike on Iran
The US Dollar (USD) gained overnight due to news of possible military actions against Iran. This caused a wave of risk aversion, leading to declines in European stocks and US equity futures, while Asian markets faced larger losses.
The Swiss Franc (CHF) performed well, even after the Swiss National Bank cut its policy rate to zero. In contrast, the Norwegian Krone (NOK) fell after the Norges Bank unexpectedly reduced rates by 25 basis points and hinted at future cuts. Crude oil and gold prices slightly increased, while Treasurys held steady.
FOMC And Inflation Forecasts
The Federal Open Market Committee (FOMC) chose to keep its policy the same, adjusting its economic forecasts to predict slightly higher inflation and slower growth. This shift is reflected in US data and a recent survey from the US Business Roundtable, which revealed that CEOs’ economic outlook has dropped to its lowest since late 2020. Progress on US trade deals is currently slow, with the 90-day pause on reciprocal tariffs ending in less than three weeks. The forthcoming Juneteenth holiday in the US is likely to reduce market activity. With no significant data expected from North America soon, all eyes are on Japan as it releases its May Consumer Price Index (CPI) data later tonight. The US Dollar’s strength is driven by news of possible military involvement in the Middle East, suggesting a move towards safety rather than confidence in policy changes. Typically, geopolitical tensions push investors towards safe havens, causing declines in equity indices and risk-sensitive currencies. This indicates a potential return of risk-off trading, even if temporary. This environment is not suitable for high-leverage bets that depend on global equity strength or returns from riskier currencies. Investors are returning to safe-haven assets, and although the Japanese Yen usually fits this category, the Swiss Franc is currently showing stronger performance—despite its zero-rate policy—emphasizing the importance of preserving capital over seeking high yields. Beyond changes in European currencies, concerns remain following the Norwegian central bank’s decision to ease rates without clear signs of economic contraction yet. The market did not expect this change, leading to the NOK’s weakness. Future rate cuts have been hinted, and we will be monitoring local inflation and wage trends for confirmation. Until then, caution is advised for those exposed to Nordic currencies.Market Sentiment And Trade Tensions
The slight uptick in crude oil and gold suggests that some market players are buying protection against further escalation, but the movement has not been significant. This indicates that traders are not yet convinced enough to push these markets into a breakout phase. This could change quickly if new political developments or shifts in inflation expectations arise. While the Federal Reserve has not changed rates, updated forecasts imply that inflation pressures may linger longer than anticipated while overall economic strength appears to be weakening. The Fed’s approach seems cautious rather than aggressive. For futures traders, this stabilizes Fed pricing but increases sensitivity to US data. The recent Business Roundtable survey shows corporate caution, with declines in capital expenditure plans, employment intentions, and sales expectations, meaning these indicators are now crucial to market sentiment. Trade tensions persist. As the three-month truce on reciprocal tariffs approaches its end, there is still no long-term solution in sight. Traders relying on supply chain dynamics or import/export strategies should minimize their exposure. The lack of clarity is detrimental to predictability in cross-border transactions, not just short-term surprises from Washington. With the US Juneteenth holiday approaching, we expect decreased trading activity. There are no major US economic reports expected this week, which makes international developments more significant. Attention will shift to Japan as it releases its key CPI data for May. Given the Bank of Japan’s challenges in normalizing policy while inflation hovers around its 2% target, these figures could affect JPY pairs and overall sentiment for central banks in the Asia-Pacific region. It’s wise to limit exposure to volatile assets during low liquidity periods and to frequently reassess positions, especially those linked to currencies and commodities that respond quickly to geopolitical and inflation signals. While there may not be sudden moves ahead, focusing on position sizes and monitoring global CPI releases and central bank guidance is advisable. Create your live VT Markets account and start trading now.Market expects BOE to keep current bank rate, with potential dissenters shaping future decisions
The central bank is expected to maintain the bank rate at 4.25%. Market predictions show a 94% chance of this decision. Recent UK CPI reports from April and May suggest there won’t be any surprises concerning the rate.
Vote forecasts indicate a 7-2 split in favor of keeping the current rate, with Dhingra and Taylor likely pushing for a rate cut. Barclays and Morgan Stanley predict a possible third dissenting vote from Ramsden or Breeden.
Rate Cut Odds
A rate cut is not expected until September. The central bank will likely use consistent language, continuing its careful approach to rate assessments, similar to the announcement made in May. Many analysts, including those from BofA, Citi, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley, and TD Securities, predict the next rate cut will occur in August. Barclays suggests today’s meeting could be notable, with “the risk of three more internal votes for a cut to 4.00%.” If this occurs, Barclays foresees consecutive cuts, reducing the rate to 3.50%. The central bank seems in no hurry to change rates. Communication remains cautious, and while the Bank Rate stays at 4.25%, there are subtle changes occurring. April and May’s inflation figures didn’t create panic or celebration but were enough to justify keeping the current rate. The market expects the current policy will remain unchanged for now. With a 94% probability, this comes close to certainty. This situation reflects a prevailing sentiment toward stability over the next few weeks and likely into late summer.Voting Patterns and Market Sentiment
The anticipated 7-2 voting split mirrors previous patterns. Dhingra and Taylor, who have persistently favored lower rates, are expected to vote the same way again. The interesting development is the potential for a third voter to join them, possibly Ramsden or Breeden, which could lead to changes. If a third member votes for a cut, it might not immediately affect rate cut odds, but it could raise expectations for an earlier decision. August stands out as a key month, marked by several analysts as a crucial point. Major banks like Deutsche, Citi, and Goldman are increasingly confident about this. Barclays has pointed out that this meeting could produce unexpected results, not in the decision but in the vote. If three members support a cut, this would create pressure for change. Barclays even hints at the possibility of consecutive rate cuts, bringing the benchmark down to 3.50%, suggesting a more significant shift than currently anticipated. The central bank’s language remains steady, cautious, and deliberate, reflecting the tone set in May. The committee is focused on data but is hesitant to act on inflation until necessary. However, if internal dissent grows, the board’s stance may shift. Changes in member sentiment can have significant implications. Our emphasis is less on the current rate and more on shifts in voting patterns. These subtleties influence entry points in metric-based trading. If three members push for an easing, it could impact near-term risk premiums and change our curve structures. There isn’t much time left if inflation shows further signs of easing in June or July. While the committee can delay action, there are limits. Watch not only for rate announcements but also for voting realignments, as these will significantly influence the August forecast. We will adjust our positions in response to how willing policymakers are to react to changing data. Create your live VT Markets account and start trading now.Pound Sterling cautiously moves against major currencies ahead of Bank of England’s announcement
The Pound Sterling (GBP) is trading carefully as we await the Bank of England’s (BoE) interest rate decision. Most analysts expect the BoE to keep borrowing rates steady at 4.25%, with a 7-2 majority in support of this.
The GBP/USD currency pair has been quiet, hitting a monthly low of around 1.3380 during the Asian session but bouncing back above 1.3400 by the European morning. The BoE is expected to maintain the bank rate at 4.25%, and there will be no press conference following the announcement.
UK Inflation and the Pound’s Recovery
The Pound has bounced back slightly as the UK’s Consumer Price Index (CPI) showed a small drop. In May, UK inflation fell to 3.4% year-on-year from 3.5% in April, which matched expectations. The decrease in inflation was driven by lower airline and petrol prices, with services inflation decreasing to 4.7% from 5.4%. On a month-to-month basis, CPI rose by 0.2%, which aligns with market forecasts. This week’s cautious trade in Sterling makes sense, given what’s coming up. Many market participants believe the Bank of England will keep the rate at 4.25%, supported by projections showing a 7-2 vote split within the Monetary Policy Committee. Much of the tension in the market has already been accounted for. The lack of a press conference is significant—it suggests the Bank does not feel the need to guide policy expectations through comments. Regarding inflation, the latest figures offer clarity without drastically changing the outlook. The headline CPI dropped slightly to 3.4%, as economists predicted. This marks the second consecutive month of mild decrease, suggesting that while price pressures are easing, they are still present. Importantly, the drop in services inflation from 5.4% to 4.7% is noteworthy since services tend to show more stability than fluctuating energy or food prices. However, declining airline fares and petrol prices indicate some temporary elements are helping improve the overall situation.Market Expectations and Volatility
The month-to-month CPI increase of just 0.2% was as expected, resulting in no surprises there. This stability may support the Bank’s current stance, meaning no immediate plans for tightening or loosening. In the foreign exchange market, GBP/USD dipped below 1.3380 before modestly recovering during the European session. This muted movement indicates traders are being cautious before Thursday’s rate announcement. While liquidity exists, strong convictions are lacking, and momentum is absent until there’s a new policy change. Regarding volatility, implied figures are currently low but may increase slightly around the decision moment. If adjustments occur, they might be found in the wording—especially the minutes—rather than just the vote itself, which is where traders should focus. The attention should be on gradual shifts rather than sharp turns. Key economic data later this month could still influence rate expectations, particularly if wage growth or core inflation remains stable. The lack of a press conference minimizes headline risks and reduces short-term event volatility. This may keep this week’s realized volatility within a narrower range unless unexpected insights arise in the minutes, like a notable split in voting or clearer comments on conditions for the first rate cut. Yield differences haven’t changed significantly to favor Sterling for the near term, so any short-term strength is likely to face resistance without strong fundamentals. The Pound is moving cautiously, consistent with other weeks with major policy announcements—progressing steadily rather than abruptly reacting—so positions should reflect this measured approach. We’re anticipating a gradual movement rather than a sudden shift. In the days ahead, watch two key factors: market pricing for the first rate cut and updates on core inflation components next month. Labour data next week will also influence expectations. For now, policymakers seem to endorse a patient approach, clearly signaling patience to options traders and hedgers—gamma exposure may remain limited, while changes in the curve are unlikely unless supported by a steady stream of macro data. Create your live VT Markets account and start trading now.Nagel believes the ECB is well-positioned for monetary policy and inflation targets.
The European Central Bank (ECB) believes its current monetary policy is on the right track. The policies are now considered neutral. The ECB aims to control inflation to support growth.
The ECB has set the neutral interest rate between 1.75% and 2.25%. Right now, the policy rate is at 2.00%. Depending on upcoming economic data, a potential rate cut could happen before the year ends.
The ECB’s current position lies within the neutral range, allowing flexibility based on new data. By placing the policy rate at the midpoint of the neutral range, between 1.75% and 2.25%, the ECB shows a careful approach rather than a restrictive one. Inflation is the main focus, and any future changes will depend on overall price trends or shifts in domestic and global demand.
Policymakers want to balance the effects of past tightening without acting too quickly in the opposite direction. Lagarde’s recent comments indicate confidence in slowing inflation but express caution about the future, particularly regarding energy and wages. This suggests a readiness to adjust: if inflation falls and economic activity slows more than expected, easing could return sooner.
Markets are adjusting their expectations, with short-dated rate futures indicating a slight downward revision by December. Swaps suggest a softer outlook for early Q4, but there is some hesitance. This cautious repricing shows low confidence, which fits the ECB’s data-driven strategy. A significant shift in risk would be premature until a consistent trend emerges.
For those anticipating price swings around rate announcements, current conditions call for quick reactions. The yield curve indicates low uncertainty about terminal rates, but timing risks are still a factor. In simple terms, the market generally agrees on where rates should go, but the journey has some bumps. This makes near-term options more appealing compared to direct positions.
The situation is further complicated by differing opinions among board members. Some are hesitant about easing before salaries reflect a downward trend. Visco noted last month that domestic inflation drivers have remained stubborn, especially in services, making aggressive loosening unlikely. We believe any changes in this direction will be gradual, supported by several data points.
Meanwhile, real yields have been quietly rising. This tightens conditions without needing to adjust headline rates, which is important for volatility models. Implied rates on eurozone options have eased, showing lower realized volatility, but they are still higher than historical averages since 2015. This is also evident in spread trades, especially those trying to anticipate a disinflationary shift.
One should also consider the peripheral debt markets. They have experienced tension even with stable sovereign spreads. Traders should stay alert for any indirect tightening, especially if quantitative tightening (QT) continues. The trajectory of the balance sheet could cause short bursts of correlation across asset classes, with long-dated options proving more resilient than expected.
Finally, we anticipate tighter liquidity conditions as we approach late summer due to the seasonal cutting back of reserves and renewed TLTRO repayments. This emphasizes the need to watch near-term funding pressures, even in an otherwise steady rate environment. Adjusting hedges for these conditions could be more crucial than pursuing minor rate forecasts in the coming weeks.
USD/CAD stays above 1.3700 and approaches 1.3730 amid rising Middle East tensions
The USD/CAD has been rising for three days straight, currently holding above 1.3700. It recently tested early June highs close to 1.3730. This trend is happening amid increasing worries about a possible US strike on Iran, which is shaking up global markets.
The US Dollar remains a strong choice for safer assets due to the growing geopolitical tensions. President Trump’s comments about getting involved in the Israel-Iran conflict have heightened market anxiety, especially following reports of preparations for a strike.
Iran Warns of Consequences
Iran’s Supreme Leader, Ali Khamenei, has issued a warning of “irreparable consequences” if the US engages in conflict with Iran. This fear has pushed USD/CAD up by over 1% in three days, despite rising Oil prices usually benefiting the CAD. The Federal Reserve has kept interest rates steady and hinted at two more potential cuts this year. Chairman Powell has cautioned about inflation risks tied to tariffs, which further supports the US Dollar. Key factors for the Canadian Dollar include Bank of Canada interest rates, Oil prices, and the country’s economic health. Changes in these areas can significantly influence the CAD’s strength, with higher rates typically boosting the currency. The economic data released from Canada can also affect currency value. With USD/CAD firmly above 1.3700 and approaching early June highs around 1.3730, it seems the pair is stabilizing in a tense environment. The swift rise, over 1% in just three trading days, highlights how quickly markets can react to external risks, especially those tied to geopolitical uncertainty.Potential Conflict Impact on Markets
Market unease stems from growing tensions between Washington and Tehran, fueled by military positioning reports. The President’s comments have intensified fears, leading traders to consider a higher chance of conflict. This situation isn’t just political—markets are bracing for a potential event that could significantly disrupt global trade and energy supplies. Consequently, investments in the Dollar as a safe option have remained strong, even as Oil prices rise, which typically supports the Canadian currency. Khamenei’s stark warnings have heightened nervous trading. This anxiety isn’t just speculation but reflects real concerns that escalation could impact a range of sensitive assets, especially those linked to commodities. In past situations like this, increased volatility has resulted in more active trading across FX markets, and we might see similar behavior again. The central bank has chosen to keep its interest rate steady, maintaining a generally dovish tone. Powell’s comments about ongoing caution due to tariff-induced inflation indicate a reluctance to change expectations for rate cuts. This, combined with geopolitical uncertainty, helps support demand for the Dollar. Traders may focus more on rate differences in the coming weeks as new economic data influences potential policy shifts. In Canada, Oil prices and rate policy play a huge role. Higher crude prices generally benefit the Canadian Dollar, but this link has weakened recently. The appeal of the USD as a safe investment has overshadowed the usual relationships tied to commodities, making it crucial to pay attention to news reactions and price levels. Upcoming data on growth, inflation, or employment could also shift central bank expectations. For those engaged in rate-sensitive trading or developing FX options strategies, incorporating factors for geopolitical risk premiums could be wise. As rate outlooks from both central banks remain steady, market participants might pivot toward volatility instruments rather than simple directional trades. Holding onto trades longer than planned could be risky if unexpected events lead to sharp market reactions that break away from traditional correlations. Monitoring volatility indexes may help identify when short-term market sentiment becomes cautious. Additionally, keeping track of open interest and positioning changes can signal when the next move is starting to gain momentum. In this environment, adapting strategies quickly is more important than maintaining a fixed directional view. Staying attuned to economic data and being ready to adjust as sentiment changes could provide the best setup for now. Create your live VT Markets account and start trading now.Villeroy says tariffs will have a minimal impact on Euro Area inflation, as the ECB stays on hold.
The European Central Bank (ECB) plans to keep its current policies in place until at least September. This decision will provide time to gather more data on the economy and inflation trends.
Recent market trends suggest a higher chance of an interest rate cut in December. This reflects ongoing analysis of economic developments.
