Markets have felt the full effect of an agreement over the weekend between President Donald Trump and Chinese President Xi Jinping as equities in Asia and offshore received a boost. As a truce for 90 days was called in the current trade war, investors flowed back into risk-based assets, as traditional safe haven assets including the US Dollar was sold off.
The US Dollar Currency Index (DXY) momentum looks to have peaked last week at highs of 97.50, pulling back from announcements over the weekend. Following the G-20 summit, the DXY has slumped a further 0.15% overnight to remain under pressure, just below the 97 handle.
Manufacturing PMI was released by the Institute of Supply Management overnight, showing a positive reading for the manufacturing sector, growing for the 115th consecutive month in November. The reading of 59.3% was a strong print for the US economy as new orders picked up 4.7% as demand remains strong due to higher consumption strength.
Several FOMC members spoke overnight including Federal Reserve Governor Richard Clarida who on Bloomberg TV & Radio concurred with Chairman Jerome Powell that interest rates are ‘much closer’ to neutral and the central bank should take a ‘gradual’ approach to rate hikes. According to the CME Fedwatch tool, target rate probabilities for the 19th December Fed meeting is a 85.7% chance of a further interest rate hike, up from 79.2% last week.