The U.S. Dollar is trading in favorable ranges against the majority of it’s G10 peers this morning as the war in Iran enters it’s tenth day.
The conflict continues to have staggering implications for energy prices as Saudi Arabia announced over the weekend that they will join Iraq, Kuwait, Qatar, and the UAE in reducing their oil and gas production as a response to export bottle necks, namely the ‘ambiguous closure’ of the Strait of Hormuz. This tightening in supply has driven oil futures over $100 a barrel, their highest level in nearly four years. The Buck is benefitting from that surge in oil prices due to the United States’ position as the world’s largest oil producer, but prices increasing so quickly poses the risk of inflationary shock, and as a result, Group of Seven countries are discussing a possible joint release of petroleum reserves in an effort to cap that swell.
What to Watch This Week…
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EUR ⇓
The Euro is down against the Buck this morning as Traders begin to come to terms with the likelihood of a protracted conflict in the Middle East. European energy prices have soared over the last two weeks, and when energy costs spike, trade balance tends to deteriorate and the Euro takes a hit as a result. Traders are also boosting bets that the European Central Bank will hike rates twice this year, rather than the one hike that was implied by the swap markets on Friday, suggesting that there is real fear of soaring inflation and slowing economic growth.
CAD ⇑
The Canadian Dollar is up against the Greenback this morning as higher prices and global supply limitations drive demand for Canadian oil. The spread between Western Canada Select and West Texas Intermediate has narrowed, lifting Canadian terms of trade and supporting the Loonie’s performance.
