Global growth concerns send Commodity Currencies lower despite surge in oil and prices

• Dollar remains strong on safe-haven flows spurred by the Israel-Hamas war
• Gold volatility surges the most since March
• Oil prices surge on disruption concerns

The Canadian currency and Australian are both weaker against the greenback as fears of rising global market turmoil grow as the Israel-Hamas conflict escalates.  Oftentimes a surge in commodity prices provide a boost to key countries that deal with surging commodities, but that isn’t happening here.

Oil

Crude prices are surging as the oil market will remain very tight given escalating geopolitical risks could threaten supplies and after banks continue to describe the US economy as resilient.  The upcoming week will see energy traders continue to pay close attention to the Israel-Hamas war, key Chinese economic data, a possible cut by the PBOC, and several energy meetings this week. China’s Q3 GDP and September activity data is expected to show the economy is headed in the right direction. The Energy Intelligence Forum 2023 will have appearances by many oil CEOs. EU energy ministers will seek a general approach on a proposal to amend the EU’s electricity market design rules. One of the key events will be China’s Belt and Road Forum, which Russian President Putin is expected to attend.

Gold

Concerns that the Israel-Hamas war could lead to a wider war in the Middle East have sent gold prices sharply higher.  Gold is seeing strong inflows as fears of a global economic slowdown grow. Demand for safe-havens are becoming more noticeable given monetary policy is restrictive enough and surging energy prices could easily kill the global outlook. High inflation and a resilient economy could point to more Fed rate hikes, but it seems the economy is finally starting to slow down. If the peak in rates is in place gold’s rebound should extend.

Bitcoin

Bitcoin remains trapped in its sub-$30,000 cage as crypto traders await a US spot Bitcoin ETF approval. Crypto volatility has been unkind to Bitcoin in Q3 and it is clear the cryptoverse is desperate for some good news. Optimism for an eventual spot bitcoin remains in place.  Cathie Wood’s latest Bitcoin ETF filing provides added risk warnings and clear segregated accounts on the Bitcoin blockchain. Sentiment however has suffered a major blow over the chaos seen in fixed income, which is driving some concerns that Bitcoin might not have a major rally once the SEC grants a spot Bitcoin approval.

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