Commodity Bloc Rally: AUD and CAD Surge on 'Super-Cycle' Speculation

The “Commodity Bloc” currencies—AUD, NZD, and CAD—are decoupling from broader risk sentiment to track a massive surge in raw materials, driven by speculative inflows and supply-side geopolitical shocks.

Copper and Oil Drives AUD and CAD

The Australian Dollar (AUD) has gained over 6% year-to-date, outperforming all G10 peers. The catalyst is a historic rally in Copper, which spiked 9.3% in a single session on the LME to reach a record $14,400.

• RBA Expectations: The resource boom has cemented expectations for the RBA to hike rates, with markets pricing in a 60% probability of a move next Tuesday.
• Speculative Frenzy: Analysts note that the metal rally is heavily driven by speculative funds betting on an AI and infrastructure-led “super-cycle,” ignoring nuanced supply signals.

The Canadian Dollar (CAD) pushed USD/CAD to a 15-month low (CAD strength), breaking key support levels. The Loonie is drawing strength from WTI Crude, which hit four-month highs due to escalating US-Iran tensions and production setbacks in Kazakhstan and the US.

Resilient Despite Diplomatic Friction

Remarkably, the CAD's rally comes amidst significant diplomatic strain between Ottawa and Washington. Reports of US officials meeting with Canadian separatist groups and trade disputes have heightened political risk. However, currency markets are currently prioritizing terms of trade gains from energy prices over diplomatic rhetoric.

Technicals

• Market participants should monitor if USD/CAD can sustain breaks below the 1.3200 handle if oil prices retrace, or if the geopolitical risk premium becomes the dominant driver.