Dollar stronger ahead of US-China trade deal

The dollar is stronger as traders anticipate the signing on Wednesday of ‘phase one’ of the US-China trade deal. Coupled with de-escalation of US-Iran tensions, an improved risk sentiment led to rallies in the Chinese yuan and emerging market currencies. The pound declined after a Bank of England official mentioned a possible rate cut later this month. Equities are poised to open higher, and bond yields slightly lower. Trading is light as traders have plenty of economic data to digest this week.

Monday:
Bank of Canada Business Outlook Survey;
German Whole Price Index (Dec);
Eurozone Economic Forecast Survey; UK Trade Balance (Nov)
Tuesday:
US CPI (Dec)
Wednesday:
US PPI (Dec);
Eurozone Industrial Production (Nov)
Thursday:
US Weekly Jobless Claims;
US Retails Sales (Dec);
European Central Bank Policy Meeting;
Eurozone Inflation Rate (Dec)
Friday:
US Housing Starts (Dec);
US Industrial Production (Dec);
US Consumer Sentiment Index (Jan)

  • FX Rates
    January 13, 2020

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    After early losses in Asian trading, the dollar is slightly higher from Friday’s levels. Traders are adjusting positions ahead of the signing, scheduled for Wednesday, of ‘phase one’ of a US-China trade deal. A weaker Japanese yen and UK pound helped fuel the dollar rally. The dollar index is trading near its highs of the month.

    GBP

    The UK pound was the worst performing of the G-10 currencies following comments from a BOE official that he will vote for an interest rate cut at the January 30 meeting if there are no signs that the UK economy is improving. GBP dropped below $1.30 for the first time since December.

    EUR

    The euro moved little overnight as traders await a slew of eurozone economic data releases and an ECB Monetary Policy Meeting this week.

    CAD

    The Canadian dollar was steady ahead of today’s Bank of Canada Business Outlook Survey, which could impact the Canadian central bank’s policy decision on January 22. Despite evidence of slowing GDP growth in Canada, expectations are that the BoC will not change rates.

    ASIA/PACIFIC

    The Chinese yuan and emerging market currencies rallied, extending a six-week strengthening run. Traders are optimistic that ‘phase one’ of a US-China trade deal will be signed this week and had some comfort that Iran backed away from ramping up confrontation with the US. The USD/CNY currency pair dropped below 6.90, its lowest level since last July. On the other hand, the Japanese yen weakened towards 110.00, its worst level since May 2019.

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Scott Petruska, CFA
WRITTEN BY
Scott Petruska, CFA

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