The US dollar is continuing to enjoy a strong position against most currencies, partly attributable to a recent improvement in sentiment relating to the trade wars, plus it not suffering as badly from ongoing political and economic concerns globally.
Recently safe-haven assets have risen, with gold touching a 6-year high. As investors become more fearful about what lies ahead for the global economy, some corners of the market are embracing perceived safer shores for protection.
After markets became concerned earlier this year that Trump would be increasing tariffs on a further $300 bn worth of Chinese goods, a stalling in the conflict of late, saw agreement to postpone any tariffs until December 15th. This may have contributed to the rising of US dollar, for it made it less likely the US Federal Reserve would cut their rates again, however tensions between the US and China remain.
Tonight is the latest FOMC (Federal Open Market Committee) Minutes, from the US central bank, the Federal Reserve. This could shed some further light on the thinking of the Fed, which would give rise to possible changes in the value of the USD. The raising and lowering of interest rates are often a big factor on the currency markets, with often a higher interest rate attracting investment in that currency, and expectations or actions on a lower rate, weakening that currency. Clients with any USD positions might wish to speak to our team to gauge an understanding of the market and the latest news.
With limited economic data this week, the market may be looking for other pieces of news that might influence the relative attractiveness for the US dollar. It seems politics and the global economic outlook are key issues, with not only the US federal Reserve cutting interest rates to stave off a possible downturn, but also the Eurozone expected to do something similar ahead.
This has potentially contributed to the US dollar being stronger as investors shy away from other currencies. For example, on GBP/USD and EUR/USD, Brexit and the Italian Prime Minister resignation have contributed to weakness on these currencies which may have caused movement the US dollar.
To that end it will be interesting to see whether the outcomes are from some key meetings ahead and possibly influence the US dollar. This weekend sees the G7 Meeting plus the Jackson Hole Symposium from tomorrow, where Jerome Powell will speak. Never one to shy away from controversy, Donald Trump is in the headlines too for a bold plan to purchase Greenland, part of the Kingdom of Denmark.
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