USD/CAD Canadian Dollar Lower After Trump Targets OPEC Causing Oil Price Drop

The Canadian dollar fell 0.41 percent pulled down by oil prices that depreciated after President Trump’s tweet.

The OPEC+ production limit agreement has brought stability to oil prices, but it has also made the group and its de facto leader Saudi Arabia targets for the President’s tweets.

The US has ramped up production and with the US-China trade war tension hitting global growth estimates oil prices would be lower if not for the OPEC+ deal.

usdcad Canadian dollar graph, February 25, 2019

Canadian stocks rose alongside other global indices as the US-China trade talks appear to be close to bearing fruit.

The loonie was trading higher on the news that the trade war between the US and China is on the verge of an agreement, but it was Trump’s tweets later in the day that had the currency lower.

Canada is a large oil producer and its currency depreciated despite the market’s appetite for riskier assets as Brexit and the US- China trade war had positive news on Monday.

Stocks were boosted by trade deal hopes, while commodities were hit by Trump’s second tweetstorm as it once again targeted OPEC for keeping prices higher. Oil dropped more than 3 percent with investors looking ahead at Fed Chair Powell’s testimony on Tuesday.

OIL – Frankie Says Relax
Oil dropped more than 3 percent after Trump’s tweet urging the OPEC to relax as oil prices were too high. Take profits were triggered even as the OPEC+ remains committed to a production limit agreement that has brought stability to global energy markets.

West Texas Intermediate graph

The balance between rising US oil production and the OPEC and other major producers cutting output was broken by a tweet. Investors sold crude following the President’s tweet even though the US via its sanctions to Iran and Venezuela were driving prices higher despite record levels of domestic production.

GOLD – Gold Falls As Risk Appetite Returns

Gold fell 0.26 percent on Monday as the market digested the news that the Trump administration was extending the deadline for the US-China trade talks. The yellow metal has risen when used as a safe haven, but progress in the trade talks and a possible extension of the Brexit deadline put downward pressure on the price of gold.

Gold will remain bid as the US- China extension is only for 10 days and despite talk of progress there has been little evidence of how close the two largest economies are to sorting their trade dispute. Brexit remains an enigma as various factions push for their preferred outcome but without apparent knowledge that some of their best-case scenarios are mutually exclusive even within UK groups.

STOCKS – Trade Hopes Keep Indices Gaining

Global indices were higher after the news that an extension to the March 1 deadline was reached between the US-China. A meeting with Chinese President Xi could be announced soon as further proof that there has been substantial progress between the two nations with something worthy of an announcement before the new March 11 deadline.

US economic data disappointed last week, with the spotlight on the first estimate of the Q4 GDP data the highlight in the indicator release calendar. Fed Chair Powell will testify in Washington with plenty of opportunities to boost optimism for economic growth taking stocks higher.

The Fed has paused its monetary policy tightening but is still sticking to a hawkish view on growth, even though it acknowledges present headwinds as it waits for more solid data.

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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