In this edition of Market Factors we discuss why the loonie may be poised for a jump and how deteriorating faith in U.S. institutions is depressing the greenback. A new and highly convenient obesity treatment is the diversion and we look ahead to important data releases on both sides of the border. Open this photo in gallery: Paul Chiasson/The Canadian Press Currencies The loonie as coiled spring Hedge fund managers rushed to short the Canadian dollar in the fourth quarter of 2024. The assumption was that a faster U.S. growth rate would divert foreign investment away from Canadian dollar assets. Things have not gone as planned. The short loonie trade was profitable for a time as the domestic currency fell from US$0.74 on October 1 2024 to US$0.69 in early March of this year. From that point, however, shorting the Canadian dollar became a losing proposition as it has rallied to more than US$0.72. The chart below shows the total short futures position for the loonie as reported by the U.S.-based Commodities Futures Trading Commission. It indicates sentiment but as far as hedge fund positioning it should be viewed as merely the tip of the iceberg. There are many ways to express a loonie short position – borrowing funds in Canadian dollars to buy U.S. assets is among other options. Scotiabank chief foreign exchange strategist Shaun Osborne sees the potential for a short squeeze that would push the loonie sharply and quickly higher. He notes that speculative short positions on the U.S. dollar more than doubled during the week ended on April 15 – the net short position in the U.S. dollar versus the loonie, Japanese yen and euro combined rose by US$6-billion to US$10-billion. Short Canadian dollar positions are the largest among countries reporting data, “leaving it vulnerable to continued adjustment in an environment of broad-based USD weakness,” according to Mr. Osborne. A rapid change for the worse in U.S. dollar sentiment combined with bloated and now offside short positions on the Canadian dollar is a recipe for a rapid jump in the loonie. Speculative investors that are short the loonie may have to cover the positions (including repaying any Canadian dollar loans) in a hurry if the U.S. dollar continues to fall and increase the losses on the trade. American turmoil Global investors flee U.S. dollar assets The ongoing weakness in the U.S. dollar is arguably the most important trend in global markets in that it reflects declining faith in U.S. political institutions. Gold, up about 30 per cent year to date, has been the primary beneficiary. The Bloomberg U.S. Trade Weighted Dollar Index is down 6.9 per cent year to date. The ostensible cause of the weakness is foreign selling of U.S. dollar assets, notably longer maturity Treasuries, but data to prove this is thin on the ground so far. (Data on central bank selling of Treasuries, for instance, is published on a delayed basis). J.P. Morgan strategists who are close to client investment flows have identified a “continued flight from U.S. dollar denominated assets.” U.S. markets have always been favoured by global investors because of their hypercapitalist orientation – the American system welcomes foreign capital with open arms - and apparent institutional stability. It is no surprise then that the trade weighted dollar is falling at a time when the White House is flaunting Supreme Court rulings and threatening central bank independence. Open this photo in gallery: Boxes of Ozempic and Wegovy made by Novo Nordisk are seen at a pharmacy in London, Britain March 8, 2024.Hollie Adams/Reuters Diversions Ozempic faces stiff competition in pill form The miraculous efficacy of injectable diabetes and obesity drugs Ozempic and Wegovy may soon be available in pill form. Eli Lilly is currently testing a treatment named orforglipron that offers similar benefits to its injectable competitors without needles and refrigeration. These treatments work by manipulating receptors for the hormone GLP-1 which is responsible for regulating hunger and insulin production. The news was originally reported in the New York Times but those without a subscription can get details here. The essentials Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page. Globe Investor highlights Rob Carrick tries to solve the retiree stock market problem: What else can you invest in? Citigroup’s chief economist says Donald Trump’s attack on Jerome Powell for not cutting interest rates shows an ‘implicit admission’ of the negative impact of tariffs Investors are relieved Elon Musk will refocus on Tesla, but are worried about brand damage What’s up next Domestic retail sales results for February are out Friday and economists expect a decline of 0.4 per cent month over month. Next Wednesday, GDP results for February will be released (no economist forecast posted as yet on Bloomberg). Earnings-wise, Teck Resources Ltd reports Thursday and profits of C$0.338 per share are expected. Firstservice Corp will also release numbers Thursday (US$0.832) as will Agnico Eagle Mines Ltd. (US$1.296). Gildan Activewear (US$0.573) earnings will be released next Tuesday. Wednesday the 30th will see Loblaw Companies Ltd. (C$1.865), CGI Inc. (C$2.128), Open Text Corp. (US$0.763) and Canadian Pacific Kansas City (C$1.032) all report. U.S. economic data releases include a preliminary reading on durable goods orders for March on Thursday where a month-over-month increase of 2.0 is expected. The advance goods trade balance report due next Tuesday might be interesting in light of tariff threats. Economists predict a deficit of $143-billion. First quarter GDP growth will be announced next Wednesday – economists expect a gain of 0.4 per cent. For U.S. earnings, Chipotle Mexican Grill Inc. (US$0.276), and ServiceNow Inc. (US$3.834) report later Wednesday. Thursday the 24th will see numbers from PepsiCo (US$1.488), Procter & Gamble Co. (US$1.533), Nasdaq Inc. (US$0.768) and Alphabet Inc. (US$2.01). Colgate Palmolive Co. (US$0.80) reports the following day. Tuesday the 29th will be busy as General Motors Co. (US$2.689), Pfizer Inc. (US$0.681), Coca Cola (US$0.721), Corning Inc. (US$0.5063), Royal Caribbean Cruise Ltd. (US$2.526) and Microsoft Co. (US$3.225) all report results. 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