The US Dollar continued where it left off, shedding another 0.6% on the US Dollar Index (DXY) to open this morning at 94.55. It was an eventful start to the week for the United States, with trade talks evolving with Mexico and Canada stealing the spotlight. Nevertheless, despite the new deals inked, the Greenback finds itself in negative territory.
The highlight for Monday was the news that the US and Mexico have reached an understanding on trade and taken the first step to a new free-trade agreement to replace NAFTA. Canada, the other original party, is also set to join negotiations, although Trump was somewhat dismissive of this, saying “we’ll see” to the suggestion. Overall, equity markets rallied across the US after the announcement although the Greenback conversely suffered. The impetus for the fall may be the increasing rhetoric from Trump on his primary trade war target. The new understanding with Mexico and moratorium on the EU tariffs have led speculators to believe Trump is shoring up relationships and focusing all his attention on the world’s second biggest economy, China. Tellingly, Trump commented in a speech in West Virginia that “China was on the way to be bigger than us in a short period of time. That’s not going to happen anymore”. The declines are likely also impacted from the unwinding of aggregate long positions taken by speculators, with many forces conspiring to precipitate the falls, such as the dovish Fed statement and China’s active steps to stabilize the CNY.
The Greenback is again set to enjoy a quiet day on the economic calendar with little to excite markets. Nevertheless, attentions remain affixed to the evolving trade conversations and President Trump.