Why is risk tone mixed this am after rollback tariffs agreed?

Risk is in the balance…again

Risk is in the balance...again

Ok, so we have had news from China and the US that rollback tariffs will be in play? So everything should be hunky dory, right?

wrong.

There are reports of fierce internal opposition from the US regarding tariff rollbacks. This is an uneasy agreement, hence the jitters.

The US-China ‘trade war’ is taking on similar proportions to the US-Russia ‘Cold War’. Any talks of ‘Phase 1’ deals are truce’s and not resolution. Who knows which way risk will flip today – just keep your eyes and ears alert. 

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Euro pressured by German growth worries, dollar holds firm tone

© Reuters. Illustration photo of U.S. Dollar and Euro notes © Reuters. Illustration photo of U.S. Dollar and Euro notes

By Daniel Leussink

TOKYO (Reuters) – The euro nursed losses against the dollar on Thursday after dipping to a 22-month low on a surprise drop in a leading indicator for economic activity in Germany, amplifying worries of a growth slowdown in Europe’s largest economy.

German business morale deteriorated in April, bucking expectations for a small improvement, a business index by the Munich-based Ifo economic institute showed on Wednesday, as trade tensions weighed on the German economy, leaving domestic demand to support slowing growth.

The greenback rallied to a 23-month high of 98.189 against a basket of key rivals overnight after gaining more than half a percent, largely propelled by the euro’s weakness. The index last traded slightly lower at 98.096.

“Yesterday’s strength of the dollar was exaggerated by the weakness in countries other than the U.S.,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“A big question is if the weakness in Australia and the euro area are temporary or not,” he said. “The main scenario is (for) a recovery in the second half of this year in the euro area and other regions.”

The euro sat at $ 1.1153, having suffered its biggest one-day loss against the dollar since early March when the European Central Bank pushed back plans for its first post-crisis interest rate hike.

The single currency also shed nearly 0.4 percent against the yen overnight and was last trading at 125.125 yen.

The Japanese currency slipped to a 2019 low of 112.40 yen per dollar on its own during the previous session, with traders eyeing a Bank of Japan policy decision later on Thursday for trading cues.

The BOJ is expected to keep monetary policy steady on Thursday and predict that inflation will fall short of its 2 percent target for three more years, signaling that its massive stimulus will stay in place for the foreseeable future.

The dollar was last a shade lower on the yen, changing hands at 112.12 yen.

The Australian dollar was largely unchanged at $ 0.7017.

The had given up nearly 1.3 percent during the previous session after weaker-than-expected Australian inflation numbers heightened the prospect of an interest rate cut.

The Canadian dollar was flat at $ 1.3495 after hitting a four-month low overnight, as investors raised bets on a Bank of Canada interest rate cut this year after the central bank slashed its economic growth outlook.

Market participants awaited policy decisions by the Swedish and Turkish central banks later on Thursday.

Sweden’s Riksbank is likely to keep its benchmark rate unchanged and may be forced to delay plans to tighten policy later in 2019, a Reuters poll of analysts published on Tuesday showed.

“The Riksbank may push further out the timing of the next rate hike, and also the market may speculate it’s too early for a rate cut by the Turkish central bank,” said Mizuho’s Yamamoto.

“That could be a negative for these currencies and positive for the dollar.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Dollar Exposed to Trump Striking Hawkish Tone at State of Union

© Reuters.  Dollar Exposed to Trump Striking Hawkish Tone at State of Union © Reuters. Dollar Exposed to Trump Striking Hawkish Tone at State of Union

(Bloomberg) — The could be vulnerable if President Donald Trump comes out swinging on trade and risks another government shutdown in his State of the Union address.

Sentiment on the U.S. currency has been driven in recent months by the trade conflict with China and Trump’s efforts to obtain funding for a wall on the border with Mexico, which prompted the longest U.S. government shutdown in history. If the president chooses to escalate these issues in his speech later Tuesday, the dollar could be set to extend this year’s drop, according to Mizuho Securities Co. and Westpac Banking Corp.

“There’s likely to be a nervous reaction — weighing on Treasury yields and stocks — if Trump just complains about Democrats and threatens another shutdown next week if they don’t agree to wall funding,” said Sean Callow, senior currency strategist at Westpac.

The Bloomberg Dollar Spot Index, a gauge of the greenback against its major peers, has fallen around 1 percent this year, as U.S. growth slows and the Federal Reserve has curbed expectations for further interest-rate hikes. Ten-year Treasury yields fell six basis points in January, the third monthly drop and the longest run of declines since 2017.

Both Morgan Stanley (NYSE:) and Nomura International Plc see dollar weakness becoming a negative spiral if foreign investors lose faith in returns from dollar assets.

For Mizuho, the market will be wary of Trump’s “obsession” with building a wall but the impact may be benign if he stops short of threatening another government shutdown, according to its chief foreign-exchange strategist Kengo Suzuki. The same applies for his comments on China.

“If Trump shows a hawkish stance but strikes optimism by emphasizing progress being made in trade talks, market impact will be limited,” he said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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