Dollar Slightly Lower; China-US Tensions Remain High

Facebooktwitterlinkedinmail

Dollar Slightly Lower; China-US Tensions Remain High

AUGUST 17, 2020

After falling for the last eight weeks, the U.S. dollar is under modest pressure again this morning. 

Overview

Geopolitical headlines continue to dog the dollar. The greenback turned negative following the news that China and the United States canceled scheduled trade talks amid mounting tensions between the two large economies.  A deadlock over stimulus negotiations has also weighed on the buck.

The House will reconvene in DC to address the growing concern over the U.S. Postal Service and the effect on the upcoming election.  The Democratic National Convention also takes place this week but neither event is likely to drastically change markets.

This morning’s fundamental data will not help the beleaguered dollar.  Empire State manufacturing registered only 3.7 in August, drastically missing estimates of a 19 reading.

While there are several Fed speakers on this week’s docket, the biggest event on the monetary policy front will be the release of the meeting minutes from the Fed’s last decision.  Inflation has shown signs of ticking upward over the past two months and continued acceleration in price pressures could leave the central bank with a conundrum. However, we don’t believe the Fed will raise rates for the next two years, likely longer.  The next Fed meeting is in mid-September.

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

EUR

The Euro is a touch stronger against the U.S. dollar and remains within striking distance of its “cycle high.”  Indeed, EUR/USD is only half a percent away from breaking fresh two-year highs. The Euro’s strength comes even as the bloc faces more COVID issues.

Italy and Spain closed their nightclubs again and the French public health agency issued a stark warning.  Germany is also looking to extend stimulus measures to the tune of 10 billion euro for job-preserving subsidies.

Expect EUR/USD to move due to technicals over the coming days as the pair tests new highs.

NZD

The Australian and New Zealand dollar moved in opposite directions against the U.S. dollar even as COVID-related headlines are giving the nation’s headaches.  Australia announced their deadliest day since the start of the pandemic and the Aussie moved stronger.

New Zealand delayed the country’s election a month as cases mount.  The Kiwi is lower this morning as there is growing speculation that the Reserve Bank of New Zealand will drop rates below zero in the coming months.  The New Zealand dollar is at a 2-year low versus the Aussie.

Facebooktwitterlinkedinmail