September 02, 2019 at 09:05AM
At the weekend, China and the United States introduced reciprocal tariffs, as promised earlier, marking a new phase of trade wars. At the same time, Trump once again encouraged U.S. companies to look for an alternative to Chinese suppliers. Such comments suppress expectations of a trade deal, despite assurances from the parties of progress in negotiations. In fact, the financial markets are developing a trend of dollar strengthening and a weakening of the Chinese yuan, which was formed last spring at the beginning of trade disputes.
On Monday morning, the RMB started the session near a record low of 7.1780, losing more than 15% of its peak levels in March 2018. While the People’s Bank of China is holding back the decline in the official exchange rate – so not to cause panic in the financial markets – it is in no hurry to fight the market. This containment policy received informal approval from the IMF, which last week noted that it saw no signs of exchange rate manipulation in the Chinese authorities’ actions. This is a kind of carte blanche for the PBoC to act in a similar way in the future.
The dollar, on the contrary, is growing against most competitors, as American investors are returning capital to the country in an attempt to survive times of increased uncertainty. As a result, the dollar index rose to the basket of major currencies to its highest level since May 2017, registering the sharpest weekly increase over the past 16 months.
EURUSD, in turn, crossed an important psychological threshold – the level of 1.10. The decline under the lows of August caused an increased triggering of stop-orders, which strengthened the drop of the euro against the dollar, pushing it to 1.0960 at the Friday close. On Monday morning there was a slight strengthening of euro purchases against the dollar, suggesting that the main battle for 1.10 remains. This is because a number of important economic reports are scheduled to come out of America, Europe and other countries this week.
Weak data from the U.S. may hold back the strengthening of the U.S. currency and potentially trigger a pullback of the dollar after the growth momentum at the end of the month. However, the strength of the upward trend of the dollar index should be carefully monitored in the longer term.
With the return of market participants from the summer holidays, the current trend of strengthening the U.S. currency may get an even stronger impulse, especially if it receives additional support in the form of tightening trade rhetoric, amid increasing concerns about global growth rates.
The FxPro Analyst Team
From: The FxPro Analyst Team https://fxpro.news/daily-forex-outlook/the-dollars-ascending-to-the-top-20190902/
Selected by fonecable.com
- Dollar eyes multi-week lows as risk assets rally
- NEWS: NZD sitting sideways just under 0.6580 – here’s what it’ll taker to send it higher July 09, 2020 at 01:10AM
- NEWS: Japan Core Machinery Orders for May +1.7% m/m (expected -5.0%) July 09, 2020 at 12:50AM
- NEWS: UK data – RICS house price balance for June -15 vs. -32 in May July 09, 2020 at 12:47AM
- EUR/USD Rate Eyes June High as Bullish RSI Trend Remains Intact
Top Posts & Pages
- GBP/USD (Mobile View)
- Gold Wave Analysis – 8 July, 2020
- NEWS: White House virus task force to hold press briefing at 11:30 am ET July 08, 2020 at 01:38PM
- DAX 30, CAC 40 & FTSE 100 Forecasts for the Week Ahead
- NEWS: ICYMI -BoE chief economist Haldane said recovery so far faster than expected, but …. July 08, 2020 at 04:59AM
- NEWS: US CDC reports 50,304 new cases as deaths rise July 08, 2020 at 07:04PM
- NEWS: Australian borders hardened even further - Queensland shuts out Victorians July 09, 2020 at 12:29AM
- NEWS: China has been buying USD as its become cheaper July 08, 2020 at 11:59PM
- Gold Prices Aim Above $1800 After Chart Barrier Breach
- China’s jobs problem runs deeper than the coronavirus