Dollar lower as China tariffs set to remain

Amid excitement over today’s signing of the ‘phase one’ China deal, traders learned that US tariffs on most imports from China will remain until after November’s presidential election. Germany’s economy is growing at its slowest level since 2013. A risk-off mood is leading to lower equity prices worldwide and a weaker dollar.

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    January 15, 2020

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  • USD

    A risk-off sentiment is leading to a weaker dollar across the board. Traders are looking past today’s signing of ‘phase one’ and seeing major challenges lingering with China. Mixed corporate earnings are pushing US equity markets lower.


    The UK pound is little changed as traders digest weak UK inflation data. UK CPI dropped to 1.3% from 1.5%, increasing odds for a BOE rate cut at month-end. Friday’s Retail Sales and next week’s labor data should provide more clues.


    The euro reached one-week highs, despite weak eurozone data: November’s eurozone industrial production increased by a less-than-expected 0.2%, and Germany’s economy grew by only 0.6% in 2019, its weakest since 2013.


    The Canadian dollar changed little overnight with traders focused on the US-China trade deal and after mixed economic news released this morning -- Canadian Home Prices showed an increase of 0.8% and New Listings declined by 1.8% m/o/m in December.


    The USD/CNY currency pair continues to trade under 6.90. Traders are digesting news that US tariffs will remain in place and that China will be penalized should they fail to deliver on promises related to currency manipulation, intellectual property and their trade surplus with the US. On top of that, traders are shifting focus to ‘phase two’ of the China trade deal, which should be more challenging.

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Scott Petruska, CFA
Scott Petruska, CFA

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