Hedge funds reached 102,495 short contracts on 28 July — the largest since 2006 — then covered 13.27% of them before the tariffs took effect.
At 12:01am Eastern Time on Saturday 22 August 2026, additional tariffs of 50% took effect on Canadian imports worth around US$20 billion annually (equivalent to C$28 billion), after Canadian Prime Minister Mark Carney suspended negotiations minutes before the deadline.
The prevailing narrative says Canadian inflation accelerated to 3.0% and the Canadian dollar rose. Neither withstands measurement. The Canadian dollar gained 2.434% against the US dollar since 28 July, but its move against the euro, sterling, Australian dollar and Japanese yen did not exceed 0.6% in either direction. Against the euro, sterling and Australian dollar, the US dollar's move remains the largest across all measurement windows; this difference in magnitude — not the sign of the other pairs — is the enduring evidence that this was a US dollar move. The Japanese yen alone departs from this pattern, and its divergence originates in Tokyo, not Ottawa.
The decisive session was 19 August, and it was a purely US event: the US Treasury announced an increase in the cap on long-term Treasury buybacks from two billion dollars to at least four billion dollars per operation, and the thirty-year yield fell nine basis points to 5.196%. On the same day, the Canadian dollar lost ground against the euro (the EUR/CAD pair rose 0.262%) — meaning that the currency said to have risen declined against another benchmark on the same day that the tariffs imposed on it were postponed.
Headline inflation rose from 2.8% to 3.0%, but CPI excluding gasoline registered 2.2% for the third consecutive month, while the Bank of Canada's preferred trimmed mean and median measures stood at 1.9% and 2.0%. The difference came from gasoline (+25.7% year on year). The reading exceeded consensus estimates by 0.1 to 0.2 percentage points, which is true; but the level of core measures did not move, which is also true, and the price itself settled the matter: USD/CAD rose on the data release day and the day after.
Behind all this stands the most important figure in this report: hedge funds held a net short position of 102,495 contracts on 28 July — the largest on the Canadian dollar in the twenty-year history of the Commitments of Traders report since 2006. The nine most extreme weeks in that history all fall between June and August 2026. Those funds then covered 13,598 contracts (13.27%, equivalent to C$1.36 billion) in three weeks — scaling back part of a record bet ahead of the event that would have validated it.
A free account gives you 4 full research papers every month. Or subscribe to EL7 Pro for full access to more than 300 papers.
$700 per year · or $99 per month