The U.S. dollar is modestly lower this morning after experiencing a swift rally on Friday.
The greenback spent most of last week on its heels, especially on Thursday as news broke that President Trump was looking to push through $200 billion more in tariffs on China. Friday’s rally came even after headline retail sales failed to miss the mark.
Trade is likely to dominate dollar trading this week. President Trump is already tweeting about “fair deals” this morning which is a clear warning to China. NAFTA negotiations between the U.S. and Canada will restart this week with Thursday as seen as the deadline to come to an agreement. A US-Mexico only deal is seen as less than ideal so both sides have the motivation to come to an agreement this week.
There is no major data set for release today or tomorrow and only housing starts and building permits on Wednesday. Philly Fed and existing home sales will cross the wires on Thursday before Markit’s manufacturing and services PMI on Friday morning.
The Euro gained against the U.S. dollar all of last week before taking a tumble on Friday. The common currency is on the front foot again this morning on general dollar weakness and trade concerns. Final Eurozone CPI from August confirmed inflationary pressures in the Eurozone are soft, but not soft enough to deter the ECB from reeling in its monetary stimulus. ECB President Mario Draghi will have a chance to address the inflation data tomorrow and Wednesday but we do not expect him to change his tact.
The sterling is slightly higher this morning, boosted by a report that showed U.K. house prices rose 1.2% in September from a year earlier, according to Rightmove data. Market participants will likely move right past the data and continue to focus on Brexit. While headlines out of the U.K. have been fairly positive over the weekend, actual progress has not been seen. With just over a month to get a deal finalized, any news will certainly push the GBP/USD.