The lower the estimates, the less energy demand that is forecasted putting downward pressure on oil. Weather (Hurricane Barry) and geopolitical (Iran vs U.S.) has added some support to crude prices but going forward with ample supply and a strong dollar prices could drop lower.
The OPEC+ extended its production agreement in July, but with a worse trade scenario, the group has a lot to discuss but little in the way of actual actions the group could take to keep oil from falling further.
GOLD – Gold Rises on Safe Haven Flows
Gold is in route for a 3.9-percent gain this week. The yellow metal has risen as investors are seeking a safe haven due to geopolitical anxiety as Brexit, U.S.-China trade war and Italian elections loom over the global economy.
Gold is up 0.35 percent on Friday and is once again trading above the $1,500 price level.
Central banks around the globe are preparing to keep rates lower and dovish rhetoric continues to be the norm. Monetary policy-makers have gotten out of the metal’s way as three central banks slashed rates this week. The Fed could follow suit in September with a 25-basis-point cut.
Trade uncertainty remains high despite the Trump administration walking back some aggressive comments, but with a Sept. 1 deadline for higher tariffs on consumer facing Chinese goods, the yellow metal will continue to be bid.
STOCKS – U.S.-China Trade War Keeping Equities Under Pressure
Stocks had a volatile end of the week having to digest trade comments from U.S. President Donald Trump and geopolitical risk rising in the Asian and European sessions. Overall, the stock market rebounded this week as China, although defiant, in matching the U.S. tariffs has kept the yuan under close watch to avoid triggering a currency war.
Investor confidence has wavered as the U.S.-China trade dispute has ramped up, but global central banks have cut rates and keep signalling further cuts to avoid the global economy falling into a recession.
Headwinds remain strong as a deal in the short term between the U.S. and China is a long shot and that is what the Friday trading session reflected.
Equities remain sensitive to trade headlines even as some of the initial shock of last week’s announcement of a new offensive to be launched on Sept. 1.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The Canadian dollar rose 0.14 percent Friday to cap a volatile week that left the loonie back to where it started on Monday. The Canadian currency was pressured downward by rising trade war concerns, but as the week went by some of the anxiety went down, sapping the momentum out of the U.S. dollar.
The loonie was able to brush off a larger than expected number of job losses (24,200) and a higher unemployment rate (5.7 percent) and is trading at 1.3206 slightly higher than the start of the Asian session on Monday.
The Canadian economic calendar next week will be quiet, with only the ADP (NASDAQ:ADP) payroll data and foreign securities purchases on Thursday and Friday, respectively. U.S. inflation and the ongoing saga of trade headlines will guide the market.
OIL – Oil Rises on Friday on Softer Dollar and Saudi Cut Expectations
Oil prices rose on Friday despite a lower demand growth forecast by the IEA as a drawdown in European inventories, a softer dollar and expectations of the OPEC making a move to stabilize crude pricing. Despite the rebound, energy prices have been under pressure all week and set for a weekly loss.
Oil continues to be sensitive to trade war rhetoric. A surprise buildup in the United States added extra pressure to crude prices. Saudi Arabia is willing to do more to prevent a freefall, but hard to imagine what that would look like. The prolonged trade war has been a negative factor for global growth estimates.