CAD can Climb, GBP Net Longs Jump

The Canadian dollar is the worst-performing major currency in 2014 but it might not be for long. The loonie was the top performer last week and vied with AUD as the best-performer Monday. The calendar is light in Asia but UK house price numbers will garner some attention.

The Canadian dollar has been as hapless as the Canadian football team this year, sliding to a 1.25% loss versus USD but the winds of change are blowing (at least on the currency field). Canadian CPI jumped Friday to 2.3% y/y in May versus 2.0% expected and retail sales rose the most in 11-months. The gains in both reports were broad-based and certain to catch the BOC's attention.

In addition, a survey from Poloz's former employer – Export Development Canada – showed an impressive swing in optimism. That's key because the two pillars the BOC expects to build a recovery on are investment and exports.

USD/CAD has broken down falling Monday as low as 1.0717 and closing below the 200-day moving average. CAD/JPY is another mouth-watering Canadian dollar charts as it closed above the April high on Monday. If the stars continue to align the loonie could end the year on top.

The US dollar was sleepy to start the week despite some better signs. The Markit flash manufacturing survey rose to the highest since 2010 at 57.5 compared to 56.5 expected. The dollar barely budged on the report but it might be a chance to catch a trade in a sleepy market. The Fed won't stay dovish forever.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

• EUR -62K vs -57K prior
• JPY -68K vs -82K prior
• GBP +53K vs +36K prior
• AUD +27K vs +28K prior
• CAD -21K vs -24K prior
• CHF -4K vs -3K prior
• NZD +4K vs +17K prior

The speculative market piled into sterling after Carney's comment about hiking rates sooner than expected. With the break of 1.70 on Thursday, expect another rush of buyers but there's still some room before the trade is overcrowded.