CAD ‘bulls’ are looking to the crosses for some early week wins, especially GBP (£1.6766) and EUR (€1.4980) and will avoid the pain of the long dollar positions in this ‘risk off’ emerging market debacle.
Demand for the U.S dollar does not look like slowing down any time soon and with three-month U.S T-Bills at +2% certainly makes the ‘long’ dollar position the safe haven of choice.
From a technical perspective, the EUR now trading through the €1.1500 outright now looks more vulnerable, especially if the market begins to focus any further negative attention on Italy in respect to its exposure to Turkey and by the country’s 2019 budget process.
GBP/CAD has fallen to around £1.6767 from around £1.7037 since the Bank of England increased the interest rate to +0.75% on Aug. 2, mostly due to the fact that the market has switched their attention to Brexit uncertainties and the possibility of a no-deal scenario.
Canadian fundamentals support the loonie on any sell-off
After last Friday’s employment numbers where Canada added a net +54.1K jobs in July on a seasonally adjusted basis and an unemployment rate ticking down to +5.8% adds to the probability the Bank of Canada (BoC) will hike the benchmark interest rate one more time in 2018. Don’t expect the BoC to stray too far away from the Fed’s rate normalization plan.
So, look to the loonie to fly against contagion angst EUR or a no-Brexit deal pound. Even positive Nafta rhetoric will support the currency’s crusade!