Trade War and low CPI dent the U.S. Dollar


Trade War and low CPI dent the U.S. Dollar

MAY 10, 2019

The U.S. Dollar is losing ground this morning following the release of inflationary figures in the form of the Consumer Price Index that failed to meet expectations.


Indeed, CPI for April, excluding energy and food, increased by just 0.1% coming behind the estimated 0.2%. Additionally, both Average Hourly and Weekly Earnings underwhelmed with readings below the month prior; significantly, the weekly went from 1.3% pace to 0.9%. At the moment of writing, the greenback sled almost half a percent on average against all counterparts.

On the trade front, the U.S.-China trade war has escalated with tariffs of 25.0% being slapped on $200 billion of products from China overnight. Beijing officials are saying they are ready to retaliate, while President Donald Trump tweeted that there is no need to rush towards a trade deal. Solutions to the impasse seem hard to predict at this point with very little in detail when “progress” has been announced and only more tariffs to worry about across industries when these talks collapse.  For now, the globe is trying to trot on and perhaps the buck is not safe from the escalation.

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The Euro is trading at its best level in over two weeks following a bit of a surge after the release of CPI in the U.S. signaled that perhaps the Fed will not have to worry about controlling inflation, but rather boost it.  Besides this, the shared currency has not been able to fully materialize on divergence in data this past month, when the tables turned and economic indicators out of the Euro-bloc are beating expectations while America is not.

A slew of data next week including Durable Goods Orders and Purchasing Managers Index on both sides of the Atlantic could paint a clearer path for Euro appreciation if those numbers show a consistent run that proves there is evidence of a healthy economic situation.


The Canadian Dollar is up almost a full percent since the release of aggressively positive numbers in the labor sector with a shock in Net Change Employment of 106K jobs added in April. The forecast was a simple 11K. It is the biggest job increment on record and surely makes up for the loss registered in March of (-7K).

Furthermore, the Hourly Wage Rate for Permanent employees also satisfied by meeting the estimated 2.3% expansion. As numbers improve all around the globe, expect that organic economic merit to cause recovery for the majors against the greenback.