Daily Currency Update

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The US dollar increases with Trump’s optimism

USD - United States Dollar

Trump is giving the impression that a deal with China may be on the horizon and US equity futures rose alongside European markets. Trump tweeted a few hours ago: “When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense.” He added earlier, “…We can make a deal with China tomorrow, before their companies start leaving so as not to lose USA business...” The US dollar and North American equity seem to be ready for a bounce this morning. The US dollar is increasing by 0.14 percent at the time of this writing.

The way the capital markets have been trading the last two days make it seem as though market participants are not positioned for a trade deal breakdown. At the same time, one of the “crowded trades” is long US dollar which might continue putting pressure on the US dollar. Some takeaways after the latest US-China trade deal news is that no trade deal means that the mood of market participants has soured significantly and the probability of cutting rates by the Fed has increased.

Key Movers

It is another negative day for the British Pound. The Cable had been trading between 1.2950 and 1.3000; however, the GBP/USD pair is trading at 1.2912 at the time of this writing. The cross-party talks between the Conservatives and Labour appear to be going nowhere with pressure building on PM Theresa May from her backbenchers to pull out of the discussions and put in place a clear road map for her departure. The idea of a Customs Union with the EU (albeit only a temporary one) had been propping up the Sterling. However, this idea is anathema to hardcore Brexiteers and the chances of it happening appear to be fading. It seems the saga is going to rumble on for some time yet, forcing the UK into taking part in next weeks EU parliamentary elections.

Expected Ranges

USD/CAD: 1.3425 - 1.3500 ▼

EUR/USD: 1.1184 - 1.1224 ▼

GBP/USD: 1.2881 - 1.2963 ▼

AUD/USD: 0.6928 - 0.6965 ▼

NZD/USD: 0.6557 - 0.6603 ▲