USD/CAD falls to three-month low as the reflation trade picks up

USD/CAD breaks the late-July low

I made the case for USD/CAD shorts last week on the growing alignment between technicals and fundamentals and that continues to unfold with today's 84-pip drop to 1.2358.

Energy is once again buoyant as oil and gas prices rise. WTI reached as high as $81.68 but has backed off to $80.85. Natural gas is up 3.5%.

Industrial metals are also back in fashion with copper prices now testing the late July high. It's a sign that the broader reflation trade is unfolding. That's a reflection of both the inflationary impulse and ongoing signs that the most-recent wave of covid might be the final one. Or at least the final big wave.

With equities getting back onboard the one spot that could derail sentiment is bonds. Yields have backtracked this week and that needs to be watched closely.

On the upside, if China delivers some stimulus -- which I think is coming -- then the commodity rally could really go into overdrive.

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October 15, 2021 at 02:00AM
Adam Button
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