U.S. Dollar Weaker as Diplomacy Takes a Hit

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U.S. Dollar Weaker as Diplomacy Takes a Hit

The U.S. Dollar is closing the week 1.4% weaker after a tumultuous couple of days that have seen the exacerbation of deteriorated relations between China and the United States.

Overview

Following with their promise to retaliate, China’s authorities have mandated to close down an American consulate in the city of Chengdu after losing their consulate in Houston. Statements from State Secretary Mike Pompeo and President Donald Trump only reinforced fears in markets as both indicated that the trade deal is not as important now. “Securing our freedoms from the Chinese Communist Party is the mission of our time,” Pompeo explained. We are in the midst of gauging reaction and assessing how this will impact the buck. Thus far, things remain familiar as previous sessions.

In addition to dwindling equity markets because of the impasse, traders and investors must wait until Monday for anything regarding a U.S. stimulus package since the White House and the Senate are still trying to agree on details. The idea would be to dole out another round of checks for $1,200.00 to those making less than $75K a year and to have something similar to the extra $600.00 in benefits some were getting. Thus far, all markets are feeling uncertain and Euro-denominated assets are being jumped on. We have Markit Purchasing Managers Index Composite scheduled at 9:45AM, which may make more dents to the buck if not impressive.

What to Watch Today…

  • No major events scheduled today

Complete Economic Calendar can be found here.

EUR

The Euro picked up another 1.6% in value this week as it benefitted clearly from the certainty of passing a rescue package that stabilizes the continent. Of course, this comes after already successful weeks of regaining economic momentum. Today, that sentiment of confidence has been solidified with Euro-bloc PMIs returning to growth with readings above 50.0, which indicates expansion.

For July, 55.1 was the composite after surveyed mangers explained they are now spending capital and employing people again. To be clear and end confusion from yesterday’s report, the shared currency is trading at its highest level since September 2018 while Swiss Franc is at its strongest point since September 2014.

GBP

The Pound rose by 1.4% this week after a tough week for the buck and uncertainty over how exactly the U.K. will trade with the EU after 2020. Sterling is about to close its best week since June. Although there are doubts about the U.K. economy, the reality is setting in that the most likely scenario will be Britain trading under World Trade Organization rules once the year ends. With Retail Sales in June jumped big time and this certainly compares much better to the current situation in the U.S.

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