Hopes of a US/China trade deal helped the dollar while other safe-haven currencies sell-off
Peter Compton " | November 5, 2019
The dollar is up today mostly vs. the euro which sold off largely due to technical factors. The Chinese renminbi is up strongly after the central bank there stepped in to help with liquidity in support of a recently weak bond market. Trade currencies like the Australian dollar are stronger today, as are currencies with higher yield such as the Indian rupee.
November 5, 2019
EUR/USD 1.1096 GBP/USD 1.2884 USD/CAD 1.3137 AUD/USD 0.6908 USD/JPY 108.91 USD/CNH 6.996 USD/ILS 3.4984 USD/MXN 19.1798 USD/CHF 0.9916 USD/INR 70.6888
The dollar gained this morning as the euro sold off and safe-haven currencies (Japanese yen and Swiss franc) lost ground. The US China trade negotiations continue with reports emerging that the Chinese are pressing President Trump to remove more tariffs ahead of a deal signing. US Services and Composite PMI data is released later this morning.GBP
The pound is flat relative to the US dollar after losing ground late yesterday. UK Services and Composite PMI data for October was better than expectations with a reading of 50 which also beat September’s reading. Political parties grapple for position in front of the December 12 general election. With a hard Brexit mostly off the table, financial markets focus on the formation of a consensus in the UK parliament thus allowing a final resolution to Brexit.EUR
The euro is down 0.7% since yesterday afternoon mostly on technical trading in the FX markets. Recent bullish positions in the euro are being replaced with euro selling as the carry trade favors higher-yielding currencies. Christine Lagarde, the new ECB president, steered clear of any comments on monetary policy in her first speech in the role. However, she has called for the EU to “not allow self-doubt to drag us down” and for “strength, resolve and courage”.CAD
The Canadian dollar is stronger this morning mostly on another increase in the price of oil which is now up over 8% since early October. Trade data for Canada came in a bit worse than expected but better than the prior month reading.ASIA/PACIFIC
The Chinese renminbi (offshore CNH) strengthened from 7.03 to 6.99 as the People’s Bank of China injected funds to support the domestic bond market which has shown recent significant weakness. The central bank move combined with increasing optimism about a trade agreement lead to a gain in the renminbi and other trade currencies like the Australian dollar.
The Japanese yen weakened as safe-haven currencies sold off.