The commodity currencies are in an fascinating spot proper now.
The US greenback is falling on a number of fronts as a result of the market is re-thinking the trail of Fed funds. However they’re re-thinking it as a consequence of slower progress and inflation.
Charges are additionally comparatively excessive within the commodity block, presently at:
- 4.50% in Canada
- 4.35% in Australia
- 5.50% in New Zealand
The query is: If the Fed begins slicing aggressively, will these different central banks match them cut-for-cut?
Within the case of Canada, I believe that argument is especially compelling. Charges are biting arduous in Canada and the housing market is floundering; the BOC has already lowered charges by 50 bps and I may see the case for attending to 2% in a rush.
There are additionally the knock-on results to issues like commodity and right this moment’s $3 drop in brent crude highlights dangers for commodity producers.
Brent each day
Proper now, USD/CAD is getting caught within the USD-crosswinds. I believe as that mud settles and the concerns in regards to the world economic system catalyze, anticipate the greenback to be a protected haven (together with JPY and CHF).
It will get even-more compelling once you take a look at the USD/CAD chart as a result of the pair may break a trio of highs over the previous two years, clearing the best way to 1.40 and past.
USD/CAD weekly