19/ 11/ 2019

Dollar Struggles on Trade Deal Outlook & Rivals Pick Up Pace

The dollar fell against the yen earlier today as receding hopes for a preliminary trade deal between the United States and China hurt demand for the greenback. The yuan touched a two-week low versus the greenback amid doubts about the U.S.-China trade war. There have been high expectations that the United States and China would sign a so-called “phase one” deal this month to scale back their 16-month long trade war. But the dollar took a hit on Monday after CNBC reported that China is pessimistic about agreeing to a deal, which suggests a resolution to perhaps the biggest risk to the global economy remains elusive. Currency traders were also wary of the dollar after Trump met U.S. Federal Reserve Chairman Jerome Powell on Monday amid the U.S. president’s repeated criticism that the Fed has not lowered interest rates enough. In a statement, the Fed said Powell’s expectations for future policy were not discussed, but Trump has for more than a year said the Fed was undermining his economic policies by keeping interest rates too high.

Looking ahead, it’s a relatively busy day on the economic calendar. Economic data out of the U.S include October building permits and housing starts. We can expect the Dollar to find some direction from the numbers, though much will depend on trade chatter from the U.S. 

17/ 11/ 2019

Week Ahead | Dollar Slips against Euro & Pound Jumps after Brexit Party Quits on More Races

The dollar was lower on Friday afternoon as some optimism for the ongoing trade talks with China buoyed trade-linked currencies like the euro and the British pound. U.S.-China negotiations continued on Friday as both sides sought to hammer out a “phase one” trade pact. U.S. Commerce Secretary Wilbur Ross said progress was being made on the agreement’s details, which helped lift trade-exposed currencies at the expense of safe-haven assets such as the Japanese yen.

Analysts said there was a very high probability the United States would reach a final agreement on a phase one trade deal with China, but would not say whether he expected a deal to be reached before U.S. tariffs on Chinese goods are set to go into effect on Dec. 15. Bleak Chinese data earlier in the week was still bolstering hopes for a deal, some analysts argued. “The belief is that perhaps, even though the numbers in the United States are barely expansionary ... the fact that China is slowing down means that there is perhaps economic leverage on the U.S. side and that China will sign on to whatever,” said a senior foreign exchange trader and strategist. On Friday, the Commerce Department reported that U.S. retail sales rebounded in October, but consumers cut back on purchases of big-ticket household items and clothing, raising questions about the consumer strength currently underpinning the U.S. economy.

This week majors will be US FOMC Minutes, PBOC Interest Rate Decision & ECB President Largarde’s Speech & EU Financial Stability report.

14/ 11/ 2019

Powell signal comfort with current interest rates but flags risk

Federal Reserve Chair Jerome Powell likes to avoid any hint of politics in his public statements, but in a seemingly non-controversial response to a question about U.S. government borrowing on Wednesday, he weighed in on one of the core issues in the political debate over how to manage the economy.

Over the past year in particular, many mainstream economists have concluded that the current U.S. government debt level, north of $20 trillion and rising by $1 trillion a year, could grow much larger without crimping the economy - especially when the interest rate paid by the government is less than the economy's growth rate on an inflation-adjusted basis, as it is now.

In answer to a question at a congressional hearing, Powell said that in his view, as long as debt grows faster than the economy, it is by definition unsustainable, leaving "our kids and grandkids ... servicing debt," instead of funding good schools and hospitals.

That conclusion, however, is not considered as clear-cut as it might have been when Powell worked on debt and deficit issues for the Bipartisan Policy Center think tank, before joining the U.S. central bank in 2012.

13/ 11/ 2019

"No Deals Means more Tariffs" from Trump's Trade Speech Put the USD in Focus

US stocks were buoyed early but started to lose elevation following a speech by President Donald Trump in front of the Economic Club of New York on Tuesday. All three major averages hit fresh intra-day all-time highs but eased into the close. The US President spent most of the speech bashing the Federal Reserve, compared to what many had hoped would be a positive speech on the progress of trade relations between the US and China. The president during his speech, continued to discuss a significant phase one deal, that was very close, but did not put any time-frame on a potential deal. Without positive sentiment from the President and little follow trade, the markets eased into the close.

It’s a relatively quiet day ahead on the Eurozone calendar. Economic data due out of the Eurozone includes finalized October inflation figures out of Germany and the Eurozone’s industrial production numbers for September. We would expect the industrial production figures to have the greatest influence on the European majors. From the U.S, October inflation figures will likely have a muted impact ahead of FED Chair Powell’s Testimony scheduled late in the day. Any pickup in inflationary pressures would normally be considered negative for the broader market. With the FED in pause mode, however, the numbers would need to be quite dire to force another rate cut.

On the geopolitical risk front, we can expect any chatter on trade and UK politics to also provide direction throughout the day.