The US dollar index fell for a sixth straight session as trade optimism continues high. This morning, the US dollar fell 0.1 percent as negotiators in Washington work on multiple memorandums covering agriculture, non-tariff barriers, services, technology transfer, and IP, which would all together form the basis of a closing trade deal between the US and China. Liu He, China’s chief negotiator, is expected to meet with US President Donald Trump tomorrow as efforts continue to extend the current March 1st deadline to allow for more talks. Regarding the US – EU trade relationship, it seems that Trump and the EU are still far from a deal to avert the tariffs threatened on European cars. Will this be the next problem for the US dollar?
From a monetary policy perspective, the US dollar was affected by the minutes from the Federal Reserve's December policy meeting, which back the trend of a continued retreat from tightening monetary policy highlighted yesterday. The FOMC meeting minutes included 13 mentions of the word "patient," and according to the minutes, there were a, "…variety of considerations that supported a patient approach." The minutes did show the Fed's policymakers divided between two positions, but those appear to be “dovish” and “more dovish.” The minutes also showed that FOMC members mostly agreed that the balance sheet rundown is likely to end in the second half of 2019.
On the data release side, new orders for the key US-made capital goods suddenly fell in December amid declining demand for machinery and primary metals. Overall orders for durable goods, items ranging from microwaves to airplanes that are meant to last three years or more, increased 1.2 percent in December versus the 1.7 percent expected; this is putting more pressure on the US dollar this morning.