The Canadian dollar fell 0.17 percent on Thursday after trade war concerns eased as the US 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 US 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 Uk could once again reshape the fate of Brexit.
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 US 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 US 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 US closing two trade fronts, gave more emphasis on the US-China negotiations and shifted the balance in favor of the dollar as a safe haven draining support from other assets.
Foreign exchange transactions carry a high degree of risk and any transaction involving currencies is exposed to, among other things, changes in a country's political condition, economic climate, acts of nature - all of which may substantially affect the price or availability of a given currency. Speculative trading in the foreign exchange market is a challenging prospect with above average risk. You must therefore carefully consider your investment objectives, level of experience and appetite for such risk prior to entering this market. Most importantly, do not invest money that you are not in a position to lose. In addition, trading on a margin basis means that any market movement will have a proportionate effect on your deposited funds. This can work for you as well as against you. The possibility exists that you could sustain a total loss of initial margin funds. OANDA's trading system is designed to automatically liquidate all open positions if your margin deposit is in jeopardy so that you cannot lose more than the funds you have on deposit in your account. It is encouraged that you employ such risk-reducing strategies as 'stop-loss' or 'stop-limit' orders, but you should be aware that market conditions may make it impossible to close out your order at the level specified. There are also risks associated with utilizing an Internet-based trade execution software application including, but not limited to, the failure of hardware and software. OANDA maintains back up systems and contingency plans to minimize the possibility of system failure. Your Margin Account with OANDA is not insured under any state or federal insurance program, or by any other entity. In the event OANDA should become insolvent or file for protection under the bankruptcy laws, it is possible that you would lose the entire amount in your Margin Account. Please be sure to read our complete Risk Disclosure Statement and contact us if you have any questions or concerns.