Market Overview

Trump quickly put dollar back to trading range. What’s next?

The weakening of the dollar, caused by Trump’s comments, continues. The dollar index sank by 0.3% for the past 24 hours to 95.1, having played down the growth of the beginning of August and returned to the upper border of the trading range of the previous three months. The EURUSD pair has increased to 1.1570 on Wednesday morning against the lows at 1.13 one week earlier. Sterling, as well as Australian and New Zealand dollars, demonstrates a similar return to the trading ranges of previous months and a departure from one-year lows. GBPUSD recovered to the area above 1.29 after failing to 1.2650 last week.

Trump’s comments about his discontent with the Fed’s hawkish policy came to a phase when the dollar was actively gaining momentum after the exit from the established range, and the movement was gaining momentum with the renewal of annual highs. The self-fulfilling wave of stop orders and flight from risks acted as a significant factor of support of the American currency. The rollback of the dollar has kept the influence of the first factor, allowing to normalize the markets for a while, but we can hardly speak about a full return of optimism.

The China and the US positions on trade are very far away, and there is still a long and bumpy road ahead the summit of the leaders. Earlier the markets were convinced that trade disputes would be resolved by the end of the summer, but for now there is a faint hope that Trump and Xi will come to an agreement even in November.

Chinese bourses are also under pressure in the morning on the PBC comments that it does not plan large-scale stimulus to accelerate the economic growth. The officials perceived the calming of the markets last week as a sign that the situation is under control as a whole. However, we should not forget that traditionally August is a very quiet month.

In addition, there are few important macroeconomic news published this week. The major players return to the market by September can lay the ground for a big trend for the coming months.

The U.S. stock markets returned back to the peak levels of the beginning of the year. In the nearest future, we will find out whether there is enough optimism on the exchanges for new historical highs in the U.S. markets.

The dollar should also answer the question: was its growth to the levels of one-year highs the beginning of a new upward impulse, or only a false start, which was successfully stopped by a few words of the American president.

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