The U.S. dollar traded in a mixed direction overnight, coming under renewed pressure against the sterling while rallying against the Australian dollar based on events abroad.
The Aussie fell to a two week low after Reuters reported that China’s Dalian port has banned coal imports from Australia indefinitely. Traders will have a fresh data dump to comb through this morning which could dictate the dollar’s tone for the day.
Durable goods orders disappointed coming in at 1.2%, missing estimates of a 1.7% expansion in December. A breakdown of the print showed that orders for business equipment unexpectedly fell in December for the fourth decline in giving months. The knee-jerk reaction has been to blame the uncertainty over the trade war with China and higher interest rates. The Philadelphia Fed also disappointed. Later, Markit Service and Manufacturing PMI will cross the wire followed by Existing home sales at 10 a.m.
Additionally, we will be following developments on the trade front. Chinese and U.S. negotiators continue to labor in an attempt to get a final trade deal. President Trump is expected to meet with the Chinese chief negotiator tomorrow. If past is prologue, we are hopeful but not optimistic a final deal will be reached by the March 1 deadline.
What to Watch Today…
- Manufacturing and Service PMI at 9:45 a.m.
The complete economic calendar can be found here.
EUR/USD maintained relatively tight 30 pip ranges overnight as economic data painted a mixed outlook for Europe. German and French PMI was better than expected with the growth found in the service sector. German manufacturing, however, gave reasons to worry as export orders fell the most in six years. Euro-area headlines PMI rose to 51.4. A reading over 50.0 indicates expansion.
The sterling popped higher during yesterday’s session as headlines broke that the Spanish Foreign minister said the Brexit accord is being “hammered out.” While the sterling retreated somewhat through the evening, it has regained its strength in early trading. U.K. Chancellor Philip Hammond said there was some movement from the EU side on the Irish backstop and said there will be a “meaningful vote” as early as next week. In truth, nothing much has changed on the Brexit front so the move in GBP/USD highlights how the pair is extremely susceptible to headline risk.