Insights

The US dollar traded mixed in July, outperforming only the risk-linked currencies, the kiwi, aussie and loonie. The kiwi and the aussie felt the heat from concerns regarding the Chinese economy, also weighed by the risk-off sentiment evident by the correction in equity markets.

The risk aversion combined with the unwinding of profitable carry traders following the suspected intervention episode on July 11 helped the yen stage a strong recovery, which was extended after the Bank of Japan hiked interest rates by 15 bips and announced a plan to taper the pace of its bond purchases.

The Canadian dollar was driven by the Bank of Canada’s decision to opt for back-to-back rate cuts and signal that more are coming. That said, the US dollar was barely impacted by the Fed’s decision to turn dovish and signal that a rate cut is possible in September, as such, a move was already fully priced in following Powell’s dovish testimony and the weaker than expected CPI data. Moreover, increasing Fed rate cut bets helped gold hit a record high near 2,485 on July 17. Both the euro and the pound took advantage of the dollar’s slide during the first half of the month, also benefiting from the outcomes of the French and UK elections.

July proved to be a smooth ride for the IXI Fund, benefitting from favorable market conditions throughout most of the period. All the strategies across traded pairs closed in positive, effectively capitalizing on underlying short-term directional price movements. Accumulated gains were concentrated on specific days during the first part of the month while they became steadier but with a decreased magnitude as the month progressed.