Corrective Pressures Weigh On The Dollar

The US dollar is broadly lower as corrective forces that were becoming evident in the second half of last week have carried over into today’s activity. The greenback is lower against all the major and most emerging market currencies. Global equities have begun the new week on firm footing, and peripheral European bond markets continue to build on the recovery in the second half of last week, while core bond yields are up 1-2 bp.

Despite the brave face put on it by Treasury Secretary Mnuchin, the US was isolated at the G7 finance ministers and central bankers. The US provocations were broadly criticized. This sets the stage for an uncomfortable G7 summit this coming weekend. What seems to annoy Europe and Canada more than the tariffs themselves is the justification: national security. The weekend bilateral talks between the US and China also did not result in fresh progress. The US appeared to signal that talks would put the tariffs on hold, and then, a few days before Commerce Secretary Ross went to Beijing, that the tariffs on $50 billion of Chinese goods in retaliation for intellectual property rights violation were seen as an insult rather an inducement to negotiate.

The Australian dollar is the strongest of the majors, rising around 1% against the US dollar. The gains were ostensibly spurred by a series of stronger-than-expected data, including Q1 inventories (0.7% versus expectations for a flat report), operating profits (5.9% versus 3.0% forecast) and uptick in job advertisements, and a 0.4% gain in retail sales after no gain in March and a 0.3% average gain in Q1 18 and 0.2% average monthly gain last year. The Australian dollar is testing a trend line from the late January high of the year (~$0.8135) and April 19 highs (~$0.7815) and is

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