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On September 11th, Futures News reported that data released by the China Futures Association on September 10th showed that, calculated unilaterally, the national futures market saw a trading volume of 1.087 billion lots and a turnover of 85.04 trillion yuan in August, representing year-on-year increases of 29.05% and 30.67%, respectively. Looking at the first eight months, the national futures markets cumulative trading volume reached 7.194 billion lots, with a cumulative turnover of 654.02 trillion yuan, representing year-on-year increases of 20.36% and 37.37%, respectively. 1. Wei Gang, chief economist at Hengtai Futures, told reporters that the August futures market saw a "simultaneous increase in both volume and price," mainly driven by three factors: First, both volume and price increased in non-ferrous metals and precious metals. Second, the crude oil and energy sectors saw a significant increase in trading volume due to geopolitical factors. Third, the chemical and agricultural futures sectors showed a strong trend and high trading activity due to cost transmission and supply-demand disturbances. Hongyuan Futures analyst Wang Jiangnan stated that, judging from the performance of various commodities, commodity futures were generally strong in August, with most major contracts closing higher. Coking coal saw a cumulative increase of over 45% in August, the energy and chemical sector generally rose, and the precious metals sector also strengthened. Looking ahead to September, Wang Jiangnan believes that the Federal Reserves monetary policy expectations are a key macroeconomic variable, with the probability of a September rate hike rising to 60%, which will suppress the performance of precious metals and risk assets. The ferrous metals sector is entering its traditional peak season, and actual demand will be the main factor determining whether the sectors performance can be sustained. Non-ferrous metals may exhibit a pattern of "structural recovery and product differentiation," maintaining high-level fluctuations in the short term. Wei Gang added that, in addition to the Federal Reserves monetary policy path, the evolution of geopolitical conflicts in the Middle East is also an important factor affecting futures market trading.On September 11th, Edmond de Rothschild Asset Management believes that the recent rise in the yen signals a broader correction of the currencys long-term undervaluation. Michael Nizad, the firms head of strategy, wrote that for many years, the yens movements have been primarily driven by the US-Japan interest rate differential and its role as a funding currency for global carry trades; now, the yen is beginning to trade more based on its own fundamentals. He wrote, "The yen may be beginning to trade as a fundamentally-driven currency again. Any pullbacks in yen cross rates should increasingly be seen as opportunities to rebuild or increase long yen positions."The Euro Stoxx 50 index fell 0.3%, German DAX futures fell 0.3%, and UK FTSE futures fell 0.1%.Market news: Next week, SpaceXs AI team will start a company from scratch and broadcast the entire process live.According to data from South Korean customs, semiconductor exports increased by 270.1% year-on-year from September 1 to 10.

Bank of Canada, Canadian Dollar, USDCAD, Inflation

Larissa Barlow

Apr 14, 2022 10:26

The Bank of Canada (BoC) chose to increase its benchmark policy rate by 50 basis points (bps), the highest increase in more than two decades. Additionally, the BoC announced that quantitative tightening (QT) would begin on April 25th, as the central bank seeks to combat three-decade high inflation. According to the policy statement, "interest rates will need to rise further" because inflation has exceeded previous predictions for 2022. Notably, inflation predictions were revised significantly upward, with the Bank of Canada now expecting inflation to hover around 6% for the most of the first half of 2022.

 

Canada, like other central banks, has struggled to curb price pressures. In January, the Bank of Canada forecasted first-quarter inflation of 5.1 percent. However, it is on track to exceed 6%, much beyond the BoC's aim of 2%. Due to Russia's invasion of Ukraine, economists worldwide have been obliged to revise their inflation and growth forecasts.

 

The BoC also confirmed its balance sheet reduction plans, with the central bank opting not to replace maturing bonds. QT is scheduled to begin on April 25, with around a quarter of the government debt acquired during the pandemic (approximately C$350 billion) maturing during the next 12 months. 

USD/CAD 1 Hour Chart

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Despite the Bank of Canada's rise, the USDCAD continues to trend higher. The cross briefly declined in nine consecutive sessions, with the Canadian Dollar's rise supported by increasing oil prices. This decrease peaked on April 5th near 1.2402, and has since recovered significantly. A fall in risk appetite has resulted in a significant bid for the USD in recent days, with the US Dollar Index gaining for the last ten days. With the USDCAD firmly on the rise, any dips may be bought as we approach the May FOMC meeting, at which the Fed is likely to hike rates by 50 basis points and announce plans for balance sheet reduction.