USD/CAD Canadian Dollar Rises on Oil Surge After Attacks

The US dollar is mixed on Thursday as the attacks against two tankers in the Gulf of Oman led investors to seek refuge in safe havens. The Japanese yen and the Swiss franc appreciated against the greenback, with the Canadian dollar rising as the price of oil jumped on supply concerns as the result of the attacks.

usdcad Canadian dollar graph, June 13, 2019

The Canadian dollar appreciated on Thursday after being under pressure against the US dollar. The attacks on two oil tankers in the Gulf of Oman drove crude prices higher and took the loonie along for the ride. Mixed economic data, with one of the major red flags being further evidence of housing weakness.

Tanker Attacks Trigger Supply Concerns as US Blames Iran

Oil prices surged more than 2 percent on Thursday as attacks on tanker ships in the Gulf of Oman created supply concerns. Oil prices were falling earlier in the week as doubts surrounded the extension of the OPEC+ agreement and rising US production was seen as weekly crude inventories have posted large buildups.

West Texas Intermediate graph

Supply disruptions in the Middle East due to violence will be a major factor, especially when it’s close to the largest sea lane for crude. Russia is playing hard to get in signalling its commitment to an OPEC+ production cut extension. The agreement from producers to reduce their output was the major factor that added stability and appreciated crude prices, losing one of the biggest non-OPEC producers could be the end not only of the pact, but could tear the group apart.

US Secretary of State Pompeo went on the record saying Iran was responsible for the attacks to reduce the flow of oil. President Trump also tweeted that Iran is not ready for a deal, as the attacks happened when Japanese Prime Minister Abe was visiting to meet with Ayatollah Khamenei.

Brent crude graph

Oil remains sensitive to supply disruptions rising despite trade war concerns putting pressure downward on energy demand and the threat of higher US crude production. The US-China trade dispute has no end in sight and investors await a potential sit down between the two leaders as a sidebar to their G20 commitments later this month.

Gold Rises After Middle East Tension Triggers Flight to Safety

Gold rose 0.69 percent on Thursday as tensions intensified in the Middle East as two tankers were attacked in the Gulf of Oman pushing the metal to $1,342.

Gold traded higher as its appeal as an alternative investment in times of uncertainty. The yellow metal has risen as the probabilities of a summer interest rate cut by the Fed have increased.

Trade tensions had given a boost to the US dollar as a refuge for investors, but the potential showdown with Iran in the aftermath of the attacks in the Middle East steered investors away from the greenback.

Stocks Rose as Energy Sector and Disney Stand Out

Equities finished higher on Thursday reversing a two-day losing streak. Energy stocks got a shot in the arm after the attack on two shipping vessels in the Gulf of Oman drove oil prices higher.

Fed rate cut probabilities continue to climb and were validated with a higher than expected weekly unemployment claims in the US.

Disney shares also rose as it is expected to be a strong player in the stream wars based on the embarrassment of IP riches the company possesses.

Markets are not focused on the US-China trade war and even brushed off some of the negative impact an escalation after the US attributed the attacks in the Oman Gulf to Iran.

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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