USD - United States Dollar
The U.S. dollar index is falling 0.15 percent this morning, despite the U.S. equity market being in a better mood following President Trump’s appeasing tone on the final day of the G-7 summit. Trump mentioned China wants to make a deal, referring to continued conversations with the Chinese over the weekend and it was backed by Mnuchin who said, “…let’s just say discussions went back and forth,” and referring to China Vice Premier Lui He’s comment that he opposed the escalation of a trade war. Also, Trump referred to President Xi as a brilliant man and a great leader yesterday, in spite of previously referring to him as an enemy. The Greenback rose 0.43 percent yesterday as intervention bets in the currency market (to stop the U.S. dollar appreciation) got unwound in light of Trump’s more realistic tone.
Yesterday, the U.S. durable goods report was weaker than expected with core capital goods orders coming in at -0.4 percent month to month versus a flat expectation, but a downward revision for June from 1.5 to 1 percent was printed. Shipments were a disappointment too, falling 0.7 percent month to month versus the expectation of 0.1 percent month to month. The latter is probably one of the causes for the Greenback’s weakness this morning.
There was little reaction in the EUR/USD pair, but the de-escalation of the trade war with China would be enough to push the Euro currency lower. However, BofAML’s Chief China Economist Helen Qiao thinks de-escalation is unlikely, and she now expects the conflict to affect bilateral investment with China rolling out its unreliable entity list targeting U.S. companies. She also feels China will be less obligated to use FX reserves to support the Chinese currency (the Yuan).
Regarding the fundamentals of the Euro currency, Germany’s economy contracted on weaker exports in the second quarter due to escalating trade disputes and waning foreign demand. There was validation of a preliminary gross domestic product contraction of 0.1 percent quarter-on-quarter from April to June after a 0.4 percent expansion in the first three months of the year. The EUR/USD pair is trading at 1.1110 this morning, showing no important changes.
The Australian and New Zealand dollars versus the Greenback were steady after whipsawing Sunday night when both opened at the lowest level since March 2009 and September 2015 respectively. Both currencies rose yesterday as market participants reacted to a series of positive developments in the U.S.-China trade war.
1.3200 - 1.3283 ▲EUR/USD:
1.1089 - 1.1127 ▲GBP/USD:
1.2213 - 1.2334 ▲AUD/USD:
0.6736 - 0.6787 ▼NZD/USD:
0.6338 - 0.6386 ▼