The U.S. dollar is on the defensive as “risk-on” trading is in full effect this morning, driving down demand for the safe-haven currency.
The Bloomberg Dollar Index is near a two-week low.
Global equity markets marched higher after President Trump announced that he would extend the March 1 deadline to raise tariffs because there was “substantial progress” in trade talks with China. The Shanghai Composite Index rose nearly 6.0% on the news and other stock indexes joined the party. Despite the positive headlines, a number of analysts have warned that the trade dispute still provides serious downside risks and a resolution is still a ways off.
The economic docket showed that the Chicago Fed index fell 0.43, worse than estimates of a 0.15 reading. The Dallas Fed and Wholesale inventories will cross the wire later this morning. Fed Chairman Jay Powell will begin his testimony in front of Congress tomorrow morning.
What to Watch Today…
- Dallas Fed and Wholesale Inventories
Complete Economic Calendar can be found here.
Commodity-based currencies were the big winner overnight on the Chinese-US trade news, with the New Zealand Dollar and Mexican peso rallying nearly a percent against the greenback. The Australian and Canadian dollar and the South African rand each rose over half a percent against their American counterpart.
The New Zealand dollar found added support after the country reported retail sales grew 1.9% quarter over quarter in Q4, beating estimates.
The GBP/USD chart resembles an electrocardiogram of an unhealthy patient this morning as traders struggle hedge their bets as the deadline Brexit looms. Prime Minister Theresa May pushed back the deadline for a meaningful vote in Parliament until March 12, instead of this week. Optimists say the delay will lessen the change of a “no deal” as it gives the PM more time to eke out more concessions from the Europeans. Our take is that an extension to Brexit is becoming more likely, so the sterling’s strength may be short-lived.