USD - United States Dollar
The U.S. dollar is mixed after a continued rise that lasted until last Friday. It ended the week stronger, as it was in sync with better than expected economic data in the U.S. Also, market participants ignored expectations of a September rate cut due to U.S.-China trade and put bids on the Greenback. The U.S. dollar index rose over 1 percent last week, beating the Swiss Franc and Japanese Yen, which were the third and fourth-best performers of the previous week. The best performer was the British Pound. Technically speaking, the U.S. dollar index seems close to a significant resistance level, but it still has not reached higher highs. Recent highs took place in April and May, with the highest level reached on August 1. At this moment, we are 0.71 percent below the highest level of the year. We cannot deny the current positive momentum of the U.S. dollar.
The risk-on mood of the FX market, which is influencing positive U.S. dollar performance comes from the White House. President Trump said the U.S. is, “…doing very well with China,” and that talks are still happening; however, he signaled that he isn’t ready to sign a trade deal yet. The most critical piece of information from the weekend arose during a dinner with Apple CEO Tim Cook and Donald Trump on Friday night. Trump said Cook made a “good case” about the difficulty in competing with Samsung if Apple products are subject to import tariffs. In response, Trump commented, “I thought he made a very compelling argument ...It’s tough for Apple to pay tariffs if it’s competing with a very good company that’s not.”
On top of that, on Sunday, White House Economic Director Larry Kudlow said that recent phone calls between U.S. and Chinese trade negotiators had been positive and may lead to further negotiations.
This week is likely to be dominated by the Jackson Hole conference, with Federal Reserve Chairman Jerome Powell’s address on Friday. The European Central Bank announced that ECB members Lane, Coeure, and Lautenschlaeger would attend Jackson Hole. Mario Draghi is not attending, but his tenure is up soon.
On the other side of the continent, Australia’s dollar stopped falling as optimism about planned U.S.- China trade talks have boosted equities and other risk assets. Furthermore, Treasurer Josh Frydenberg said in an interview with Sky News that Australia is as well placed as any nation to handle the fallout from U.S.-China trade tensions and any slowdown in global growth.
Regarding the British Pound, the currency markets are petrified by an expectation of a no-deal Brexit. According to Bloomberg, unlike June 2016 and March 2019, both FX spot and FX options markets show elevated downside risks.
1.3255 - 1.3291 ▲EUR/USD:
1.1059 - 1.1126 ▲GBP/USD:
1.2100 - 1.2186 ▼AUD/USD:
0.6752 - 0.6797 ▲NZD/USD:
0.6395 - 0.6429 ▼