The U.S. dollar remains at the best part of recent ranges, rallying a bit overnight to erase losses seen after Friday’s mixed jobs report.
Without any tier 1 data on the docket, traders have instead focused on the increasing trade tensions between China and the United States. President Trump that that U.S. has “won” the current trade war against China. China countered with an editorial published in state media that explained the country is in it for the long haul and is willing to give up short-term losses. Late Friday, China released a list of tariffs that would be retaliation for the new $200 billion tariffs imposed by the United States on Chinese imports.
The economic docket is empty until Thursday morning when producer prices and weekly jobless claims will cross the wire. Consumer prices are likely to show a tick higher on Friday and will continue to give the Federal Reserve the scope to continue their rate-hiking cycle. Markets are pricing in a 100% chance the Fed will boost rates by 25 basis points at their September 26th meeting.
The Euro continues to be under modest pressure against the U.S. dollar. EUR/USD is down for the fifth consecutive day, its longest losing streak since May 18th. The common currency sold-off overnight after data showed that German factory orders dropped 4.0% in June from the previous month. The reading failed to miss an already low expectation of a 0.5% drop.
The sterling dropped overnight and briefly touched an 11-month low against the U.S. dollar as the uncertainty over Brexit dominated headlines. U.K. International Trade Secretary Liam Fox said over the weekend that the odds the U.K. fails to secure a trade deal by the deadline is about 60%. The British economic docket is light this week so Brexit will likely drive trade. The biggest event is June and second quarter GDP.