Iran Deal and Venezuela Elections Push Crude Oil to 3.5 Year Highs

Crude oil was one of the top gainers for the week. The price continued to soar, reaching the highest level in three and half years. This was a continuation of a trend that started a week ago when the US president exited the Iran deal. Investors believe that the exit of the deal will affect the country’s ability to export crude. It is estimated that the affected crude oil could be more than 200K barrels a day. Another important factor for crude is the upcoming election in Venezuela. Nicholas Maduro is expected to win the election, which will add more sanctions to the country, thus affecting the supply. Maduro has led a socialist country with the biggest inflation rate in the world. WTI and Brent crude oil reached a high of $71 and $80 respectively. In the past one year, the two have gained by almost 50%.

The Japanese Yen continued falling against the dollar. This came as the country announced first quarter GDP numbers which missed analysts’ forecasts. In the quarter, the country’s GDP contracted by negative 0.2% and at an annual rate of negative 0.6%. The contraction ended the longest economic growth the country has seen in 28 years. It was also lower than what analysts were expecting and was mostly attributed to reduced consumer consumption and business investments. Today, the country reported its inflation data that missed what analysts were expecting. The inflation for April was at 0.6%, which was lower than the expectations.

The dollar was another winner for the week. The win came mostly because of the weakness in other currencies and the rising bond yields. On Wednesday, the closely-watched 10-year note rose to above 3.10%, which was the highest level since 2011. The yields rose as investors grew weary about the change in language between the US, North Korea, and the European Union. In North Korea, the leaders threatened to pull out of the summit planned for June. In the EU, the leaders met in Bulgaria to talk about the Iran deal and how to respond to Donald Trump. The leaders took a cautious approach but said they would move to protect their companies against the new policies of the US.

Cryptocurrencies were also big movers this week as two of the biggest events took place. Early in the week, more than 4000 people – who had paid $2,000 – in entry fees met in New York. The key speakers included people like Jack Dorsey and James Bullard, the St. Louis Fed president. In the event, the major news that came out was that Circle, which is backed by Goldman Sachs was launching a new dollar-backed cryptocurrency. Yesterday, another group of cryptocurrency enthusiasts gathered in New York for the Token Summit took place.

Global stocks had a mixed week with investors getting worried about trade. On Wednesday, Trump said that he was little hopeful of China trade talks. In the past few weeks, the US and China have been having discussions aimed at improving trade between the two countries. Yesterday, the president met with the chief trade negotiator from China, amidst reports that his team was in disagreement when they travelled to China. During the week, China also had a tough talk about the trade between the two countries and yesterday, Trump accused China of interfering with the North Koreans. The chart below shows the performance of Dow, DAX, S&P 500 and Nikkei within the week.

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