With the Fed holding rates steady and revising down its future rate path, the big news in FX this week is the rapid decline in the value of the dollar. This news has overshadowed the continued declines in sentiment coming from other central banks around the world, notably the Bank of Japan and Central Bank of Russia. At the same time, sentiment from the ECB, Bank of England and several others has barely rebounded from lows in early/mid February. This all points to a lot of currencies declining simultaneously, but everything is relative and you can't short everywhere!
The one outlier in central bank sentiment right now is the Bank of Canada. With oil prices on the rise over the last month and the Loonie oversold, the BOC is demonstrating rising sentiment and we see a long CAD opportunity. This can be paired with a variety of shorts, like the JPY and RUB, but we also see the recent decline in the USD as a temporary effect and with the Fed still tightening while other central banks around the world loosening policy. So, we suggest staying away from short dollar trades for the time being and looking to the wide variety of other shorts in this market. Any of these shorts would pair nicely with a long CAD trade.
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