U.S. Dollar Weak On Trade Deal Uncertainty

The U.S. Dollar fell overnight as developments in trade here and across the Atlantic lessened the buck’s value as a down-the-line asset.

Overview

White House officials could not confirm with any certainty what deal exactly the President made with China’s Premier Xi Jinping in Argentina. In fact, what they could confirm was that the countdown for the three month truce on tariffs started already on December 1st, not as originally reported to be scheduled to begin on January 1st.

Additionally, markets are starting to look convinced that the Federal Reserve may indeed slow down their pace of interest rate increments. The Treasury bond yield curve is now inverted, below zero for two, three, and five-year bonds. This is significant because it is typically a preamble sign to a recession as long-term stability is put in doubt. With no data today or tomorrow, Thursday will be a busy day as all expected figures will be released then to accommodate for the funeral services of former President George H.W. Bush.

What to Watch Today…

  • • No major events scheduled for today.

EUR

The Euro is trading in its strongest ranges in over a week, boosted by the bad news on the U.S. side and optimism over Italy. While China has no answers to the trade conflict talks held at the G-20 meeting, the EU financial officials are hopeful Italy will make necessary changes to make a satisfactory budget. Some political worries over populist movements gaining ground can weigh on euro long-term if there is further success, but for now the focus is on China and Europe’s plans for dealing with the U.K.

GBP

Pound Sterling surged overnight with news that the top court in the European Union released an opinion that states Britain can decide solely to withdraw its request to leave and separate from the EU. While this does not mean there will be an attempt to end the Brexit process, it helps Prime Minister Theresa May in having the hardcore Brexiteers in her party and cabinet to have the realistic expectation that just staying put with then European Union as a member is an actual option.

Concessions to May could help land a customs deal, but it could also embolden the opposition to seek a brand new referendum seeking to put the Brexit to a halt. Anything other than leaving the EU entirely is a good thing for the Pound.