Daily Market Update

Dollar Gains on Trade Tensions; Sterling Falls Despite Rate Hike

August 02, 2018

The U.S. dollar has found some strength overnight as global trade tensions are once again on the rise.

Overview

It is reported that the Trump administration is considering an increase the proposed tariff on $200 billion of Chinese goods to 25% from a the current proposal of 10%. Not surprisingly, China’s Ministry of Commerce said it was ready to retaliate.

The safe-haven Japanese yen is also benefiting as equity indexes are currently a sea of red.

The greenback gained a bit yesterday afternoon after the Federal Reserve meeting. While the Fed did not raise rates, traders are increasing bets of a September rate hike and a possible fourth rate hike by December.

U.S. data set for release later this morning will likely dictate whether the U.S. dollar can hold on to its overnight gains. Factory orders and Durable goods will cross the wire at 10 a.m. Tomorrow’s non-farm payroll report continues to be the biggest risk event on the week’s calendar.

 

EUR

EUR/USD fell to a two-week low on broad dollar strength. There was no major economic data or speeches in the Euro zone today so the move can be attributed to the dollar’s positive reaction to new trade tensions. EUR/USD attempted to break below key technical barriers in early trading but failed to hold below, indicating we might see the pair rise back to recent, tight ranges.

 

GBP

The sterling is taking a pounding this morning even after the Bank of England raised interest rates for only the second time since the financial crisis. As expected, the BOE voted to raise interest rates by a quarter of a point. But the vote was unanimous, which was a surprise. Nevertheless, the sterling has fallen to its weakest level since July 20th. BoE Governor Mark Carney held a mostly hawkish stance but it was not enough to convince traders that tighter policy is likely in the future with Brexit only eight months away.

 

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