The Canada New Housing Price Index showed a year-on-year increase to -0.8% in June, an improvement from the previous reading of -1%. This change points to a slowdown in the rate of decline for housing prices in the country.
The EUR/USD currency pair has seen some recovery, moving towards the 1.1750 zone following progress in a US-EU trade agreement. Meanwhile, GBP/USD has climbed to daily highs near 1.3560, amidst changes in the US Dollar’s performance linked to the US-Japan trade deal.
Gold Market Trends
Gold has fallen to two-day lows, slipping below the $3,400 mark per troy ounce. The ongoing decline is attributed to eased trade concerns post-US-Japan agreement and potential positive US-EU developments.
Cryptocurrencies like Bitcoin, Ethereum, and XRP have shown weakness, resulting in a 3.5% drop in total market capitalisation, now at $3.9 trillion. However, rising Open Interest suggests underlying bullish speculation in the crypto market.
Under Trump’s second presidency, early months have seen erratic policy changes, yet markets have remained stable. His administration has focused on “America First” policies impacting trade, tax, AI, and national defense sectors.
Canadian Real Estate Outlook
The slowing rate of decline in the country’s housing prices suggests the market is finding a floor. Recent Statistics Canada data shows the New Housing Price Index was down only 0.1% year-over-year in May 2024, a notable improvement from the steeper declines seen in late 2023. We believe this presents an opportunity for call options on Canadian real estate ETFs, anticipating stabilization.
With the EUR/USD pair hovering near 1.07, recent inflation data showing a divergence between the US and the Eurozone creates trading opportunities. While US CPI has remained persistent above 3%, Eurozone HICP has cooled to 2.6%, suggesting the European Central Bank may diverge from the Federal Reserve on rate cuts. Derivative traders could consider strategies that profit from this policy gap, such as selling euro call options.
The precious metal’s recent trading range reflects a market adjusting to a “higher for longer” interest rate environment. The opportunity cost of holding non-yielding bullion increases when assets like US Treasury bonds offer attractive yields, with the 2-year note currently above 4.7%. We see continued pressure on its price, making put options a viable strategy to hedge against or speculate on declines if rates remain elevated.
The cryptocurrency market shows a classic divergence, with prices for major assets like Bitcoin consolidating while derivatives open interest remains elevated, recently exceeding $32 billion for BTC alone. This signals that leveraged traders are active and anticipate a significant price move, even as spot market momentum has weakened. We advise using options strategies like straddles to capitalize on the coming volatility, regardless of the direction.
The political landscape, particularly with the upcoming US election, is introducing sector-specific uncertainty reminiscent of the previous administration’s policy focus. Historically, election years can increase market volatility; for instance, the VIX index saw notable spikes ahead of the 2016 and 2020 elections. We are positioning for this by using derivatives on sector-specific ETFs, such as those tracking defense and energy, which could see significant movement based on policy shifts from Mr. Trump’s potential platform.
