At this point, you have to assume there's a decent amount of 'recession' priced into oil and gas prices along with other commodities but they're still holding up.
WTI crude oil is up $2.12 to $96.80 while brent trades at $105.18 with that spread set to incentivize North American exports in the near term.
Perhaps more of a factor in FX today is the natural gas market. Henry Hub is up nearly 6% to $8.78, which is back to where it was when the longer Freeport LNG closures were announced. The captured gas from that has been offset by high power demand in the US due to hot temperatures.
Given the high prices of oil and gas, Canada is set to receive and windfall on both trade and fiscal flows. That should help to blunt a house price decline that could get ugly.
The loonie also continues to benefit from rate differentials. The Bank of Canada hiked 100 bps two weeks ago and its benchmark will be marginally above the Fed if the FOMC opts to hike 75 bps, as expected.
In a video today, Greg highlighted (skip to 20:25) the potential for a head-and-shoulders top in this pair. That would target a return back to 1.2500.
Also, here's a simple case for why the bull market in energy isn't over.
Owning energy stocks into a recession is usually a bad idea.
— Scott Willis (@ScottW_Grizzle) July 25, 2022
Here are 6 charts that changed my mind..#COM #EFT #OOTT
