The United States Dollar finds itself in positive territory for the first time this week as President Trump outlined another escalation over the trade war with China. The US Dollar Index opens this morning at 94.80, a marginal increase of 0.18% across a basket of currencies.
It was an otherwise slow day on the economic calendar, the US Core PCE Deflator for July came in at 2% y/y as widely expected, barely registering with investors. The massive hitting impact came from its usual source this year with President Trump announcing that the next round of US tariffs on China will be proceeding unimpeded. Markets reacted as expected with emerging market currencies depreciating significantly on the news. Safe-haven currencies such as the Swiss Franc, Japanese Yen and US Dollar all appreciated against their counterparts, highlighting market concerns over the trade spat. Adding to the worries was Argentina, with President Macri’s surprise request to the IMF to speed up its release of their $50bn bailout package. In what is an alarming development, Argentina’s 60% interest rates have failed to stem the depreciation, exacerbating concerns on emerging markets and supporting the US Dollar.
The Greenback now turns its attention to the economic calendar, with Michigan Consumer Sentiment and Expectations. Baker Hughes Oil Rig Count is reported in the early afternoon count is expected to remain unchanged at 860. The focus of market participants is squarely placed on the headlines on global trade.