USD/CAD Canadian Dollar Lower on US Dollar Resurgence

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.

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 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.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza