Canada’s retail sales excluding autos experienced a slight decline of 0.2% month-on-month in May. This figure outperformed the anticipated 0.3% decrease.
The EUR/USD was fluctuating around 1.1770 as the markets reacted to the ECB event. Optimism is present regarding a potential trade deal between the US and EU.
Gbp Usd Movement
GBP/USD faced renewed downward pressure, retreating to the low-1.3500s. Mixed UK data contributed to this downward movement.
Gold prices rebounded slightly after dropping below $3,350 and remain below the $3,400 level. The price is influenced by favourable USD movements and heightened US yields.
In the cryptocurrency market, Bitcoin regained $118,000, while Ethereum and XRP showed bearish signals. Ethereum settled at $3,630, marking a 6% drop from recent peaks of $3,858.
The first six months of Trump’s second term saw unpredictable policy shifts and a strong market resilience. His focus remained on the “America First” agenda, affecting trade and national priorities.
Canadian Retail Sales Data
We view the recent data on Canadian retail sales, which showed a 0.9% increase in January 2024, as a sign of underlying consumer strength. This resilience could provide temporary support for the Canadian dollar. We are positioning for volatility in the currency, using options to protect against unexpected shifts in central bank policy.
The Euro continues to trade weakly against the dollar near the 1.0850 level, as the European Central Bank appears more likely to cut interest rates before the U.S. Federal Reserve. This widening policy divergence suggests a path of least resistance is lower for the pair. We are considering put options on the EUR/USD to capitalize on this expected downward trend.
Sterling is facing its own challenges, weighed down by recent UK inflation data that remains stubbornly high at 4.0%. This economic backdrop creates uncertainty for the Bank of England and has capped the pound’s value around the 1.2600 handle. Given the headwinds, we see more risk to the downside and are cautious about taking long positions.
Gold is struggling to maintain momentum above the $2,200 per ounce level, pressured by U.S. 10-year Treasury yields holding above 4.2%. Historically, periods of high yields and a strong dollar have limited the appeal of the non-yielding precious metal. We believe selling call options presents a prudent strategy to gain from what we see as a capped upside.
In the cryptocurrency market, a significant divergence is unfolding as Bitcoin approaches $70,000 while altcoins like Ethereum show weakness. Bitcoin’s market dominance has climbed above 52%, the highest since April 2021, indicating a flight to safety within the asset class. This suggests a pairs trading strategy, buying the market leader while selling a basket of underperformers, could be effective.
The market must prepare for potential shocks from the unpredictable policy agenda of Mr. Trump. The threat of a universal 10% import tariff could trigger market volatility similar to the 2018 trade war period. Consequently, we are increasing exposure to instruments like VIX futures to hedge against sudden, politically driven downturns.
