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Briefing highlights

  • When the shorts ultimately get squeezed
  • Canadian dollar above 74 cents
  • Pound sinks as May denied majority
  • Global markets at a glance
  • Jobless rate ticks up to 6.6 per cent

‘Jokers’ to the left of me

David Rosenberg believes the “jokers” shorting the loonie are in for a shock.

Like other observers, the chief economist at Gluskin Sheff + Associates has raised his eyebrows at the record levels of shorting of the Canadian dollar by speculators.

And he has spent two days in a row now warning in his research notes to clients that watching those speculators scramble for shelter “is going to make for very fascinating sport indeed.”

Mr. Rosenberg was referring to the latest numbers from the U.S. Commodity Futures Trading Commission, which showed net short bets against the loonie at $7.3-billion (U.S.).

In contract terms, the net short numbered more than 98,000 last week, down marginally from the record of a week earlier. Both the gross shorts and the gross longs declined but the net showing hardly changed.

Those numbers were released a week ago, and measured as of a few days earlier.

Currency analysts have been saying the speculators will have to cover because they were underwater as the loonie gained in value.

We’ll learn later today, when the CFTC releases its weekly report, whether the needle has moved much further.

There has been pessimism surrounding the currency, largely of late related to concerns over housing and mortgage financing in Canada, which added to earlier worries over the trade tensions between Canada and the United States.

But the Bank of Canada is sounding a happier note these days, changing its tone somewhat where the broader economy is concerned, as The Globe and Mail’s David Parkinson reports.

“Nothing out there has anything remotely close to such a universally bearish view as this one-sided negative bet on the loonie,” Mr. Rosenberg said of the speculators, adding that “a whole lot of negative news and then some” is already priced into the currency.

Mr. Rosenberg’s models, which takes in oil prices, among other things, would peg the Canadian dollar at 75 cents, compared to a recent level above 74 cents, which means there’s “more than a half-penny upside.”

And just wait until the Bank of Canada begins to move on interest rates.

Other analysts, too, predict better times ahead for the loonie.

Which brings us to my favourite part:

“These same jokers that were net long the loonie to the tune of over 60,000 contracts when the Canadian dollar was last at parity with the greenback in the opening months of 2013 are now net short to an absolutely incredible degree,” Mr. Rosenberg said.

“Imagine if these speculators, with an unprecedented one-sided view, are as spectacularly wrong today as they were back then?”

Markets at a glance

Canada churns out jobs

I’m guessing Statistics Canada’s latest jobs report is raising more than a few eyebrows.

The economy churned out more than 54,000 jobs in May, the federal agency reported, with huge growth in full-time positions.

The unemployment rate ticked up to 6.6 per cent, though, as more people went searching for work.

Employment is now up by 1.8 per cent, or 317,000 jobs, over the past year, largely in full-time positions.

Job creation was far higher than expected, and one should note that the forecasts are frequently off and questions often raised.

“All told, an extremely strong employment report for Canada, coming on the heels of last week’s strong GDP figures,” said Nick Exarhos of CIBC World Markets.

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