The Canadian dollar fell 0.17 percent on Thursday after trade war concerns eased as the U.S. is delaying or near an agreement on auto and aluminum tariffs to focus on China. The greenback rose as it was the preferred destination for refuge if a deal between the U.S. and China can’t be reached.
Oil prices and solid economic indicators pushed the loonie to a six day high earlier in the session but as the two largest economies remain far apart investors sought safety in the dollar. Political uncertainty in England and Europe validated that decision as parliamentary elections in the EU and a leadership challenge in the U.K. could once again reshape the fate of Brexit.
usdcad Canadian dollar graph, May 16, 2019
Gold, the Japanese yen and the Swiss franc were all lower against the dollar as it jumped once ahead of the pack of safe-havens.
The Canadian dollar was higher on USMCA confidence and is still the strongest major against the greenback but questions remain on for how long. The U.S. has adopted a more combative tone with China, which could carry over into auto negotiations in Europe. The USMCA has been signed, but until it is ratified it’s not out of the woods
OIL – Crude Rises as Middle Eastern Tensions Remain
Energy prices rose on Thursday as tension in the Middle East showed no signs of easing. Disruptions to supply, either from the OPEC+ and their output cut agreement or due to political sanctions, weather and military actions have pushed prices more than 30 percent year to date. The fact that demand has not grown at the same rate, and there has been a significant ramping of production in the US highlight the fact that the market has been hyper focused on geopolitics while supply demand fundamentals have taken a back seat.
Trade war concerns have limited the rise of crude, as a tariff escalation would be negative for global growth. Energy demand would drop but so far the White House continues to be hopeful a deal can be reached, even as it is confident it would come out ahead of a full out trade war with China.
GOLD – Yellow Metal Loses Appeal as a Safe haven
Gold lost 0.84 percent after the resurgence of the U.S. dollar. The metal had been higher on trade uncertainty but a stronger greenback has put downward pressure on gold prices. The Trump administration is expected to delay by six month auto tariffs and reach a deal with Canada and Mexico on steel and aluminum. The U.S. closing two trade fronts, gave more emphasis on the U.S.-China negotiations and shifted the balance in favor of the dollar as a safe haven draining support from other assets.