Safe-haven status and comparably higher short-term yields help US dollar
Peter Compton | May 29, 2019
Global investors remain very cautious selling risky assets and moving to relatively safe investments like US Treasury securities. The trade war between the US and China dug deeper as China threatens to restrict the export of so called rare earth materials to the US. The US imports 80% of such materials from China and uses them in cell phones, electric cars and many other technology gadgets.
“Life is a long lesson in humility.”
May 29, 2019
EUR/USD 1.1147 GBP/USD 1.2653 USD/CAD 1.3497 AUD/USD 0.6924 USD/JPY 109.35 USD/CNH 6.9302 USD/ILS 3.6167 USD/MXN 19.2254 USD/CHF 1.0064 USD/INR 69.8338
The US dollar is stronger today on global investors demand for the relative safety of US Treasuries. Mortgage applications for May showed a contraction of 3% confirming a slowing US housing market after yesterday’s weaker than expected home price data.
The US Treasury has confirmed that no major trading partner currently meets the currency manipulator status. However, a number of countries, including China and Germany, remain on the watch list.GBP
The British pound is lower today having now fallen 4% since May 3. FX traders are now eying the lows from December of 1.2516 in the face of political uncertainty and its knock-on effects to Brexit and the UK economy.
In the Conservative leadership contest there are now eleven MPs in the race. Boris Johnston has been asked to appear in court to answer questions regarding misleading statements he made regarding UK spending on the European Union.EUR
The euro weakened despite French consumer spending data coming in stronger than expected. EU leaders gathered yesterday to start discussions on who will become the next EU President and leader of the European Central Bank. Reports emerged that there are key differences of opinion between Merkel and Macron.CAD
The Canadian central bank meets later today and is expected to leave its benchmark rate at 1.75%. Inflation is subdued in Canada and housing prices in two key cities have been falling recently.
Oil – after rallying for three days – again slid to its lowest price since mid-March. Traders are concerned a global economic slowdown will decrease demand for oil.ASIA/PACIFIC
Chinese renminbi weakened for a third day in a row relative to the US dollar – mostly on trade concerns but also on concerns regarding the overall strength of the Chinese economy. FX traders do not expect the renminbi to weaken much more until after the G-20 meeting in Japan on June 20.
Australian dollar weakened somewhat as traders await Reserve Bank of Australia meeting next month to see if monetary authorities cut rates.
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