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###POV: FX OPTIONS SEE LITTLE LONG TERM......>

CANADA
CANADA: ###POV: FX OPTIONS SEE LITTLE LONG TERM CAD IMPACT FROM NAFTA 2.0
-USD/CAD's risk reversals curve shows hedgers believe the current CAD rally will
provide near-term relief for the currency, but there will be no sea change to
the medium- or long-term outlook.
-USD/CAD risk reversals out to 2-months have dropped sharply: the 1w contract
now sits at its lowest since April as CAD call demand shoots higher. This isn't
the case further out on the curve, however. Tenors beyond 3-months have barely
budged and the longer-term measures have actually edged higher, signalling
options markets see little longer-term impact on USD/CAD from the newly
negotiated USMCA deal.
-CAD is currently enjoying its best two-day performance against the USD since at
least December last year, rallying comfortably through the 200-dma for the first
time in six months. Correlation analysis, however, shows USD/CAD is caught in a
tug of war between rates markets and commodities, and these will remain the most
influential factors for now. See: MNI ANALYSIS: CAD Tug of War email at 0900BST
for full details.

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