The dollar seems to be climbing for the seventh day in a row, which seems to be the longest series of increases since March this year. The American currency has climbed to the highest level in over two years.
When, at the beginning of September, the United States introduced another round of tariffs on Chinese goods, the trade conflict escalated. The market and investors are now waiting for new information about talks between representatives of the USA and China. For now, it is known that the American and Chinese side are trying to set a meeting schedule this month. High uncertainty may cause another rise in US Treasury bond prices. Futures contracts are at levels last seen in the second half of 2016. The desire to buy quite high yielding US debt compared to Europe by foreign investors may also cause an increase in demand for the dollar.
The internal weakness of the euro and the British pound also contributes to the overall strengthening of the USD. European currencies are still under pressure of very weak data, the Brexit without a deal and possible significant easing of monetary policy by the European Central Bank this month. The GBP/USD exchange rate fell below 1.2000, which is the lowest level since 2016. Prime Minister Boris Johnson began to consider early elections if, in Tuesday's vote, parliament blocks the possibility of leaving the European Union without a deal. Politicians who oppose Brexit without a deal are expected to pass regulations on Tuesday forcing the prime minister to extend the Brexit deadline if an agreement with the European Union is not reached.
On the other hand, the EUR/USD exchange rate seems to be decreasing for the seventh day in a row, which is the worst loss series in almost three years. The single currency is also exposed to the effects of Brexit without a deal. This would be a blow not only for Great Britain, but also for the EU and its economy, which is already struggling with a much greater slowdown than previously expected.
The macroeconomic calendar is scheduled for publication of PMI indices for Canada and the US manufacturing today – at 15:30 and 15:45, as well as the ISM report for the US at 16.00. These data can be interesting because they are still at the border of 50 points separating the slowdown from expansion in a given sector.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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