News & Analysis
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The US dollar continued Monday’s rally yesterday as trade optimism continued. The greenback found an extra source of stimulus in the form of the ISM non-manufacturing index.
The US dollar DXY index rallied 0.3% yesterday, with the greenback making the most ground against the Scandies and Japanese yen.
After weakening on the whole last week the US dollar is enjoying a slight bid this morning against haven currencies such as CHF and JPY.
Following the Federal Reserve’s decision to pause the current period of cutting rates, dubbed as the mid-cycle adjustment, today’s Nonfarm Payroll data will have added impact.
Our view is that the Aussie will be broadly flat in Q4 as the RBA cuts rates once more and US-China tensions ease, but remain unresolved, creating persistent uncertainty.
Our view is that USDCHF is likely to remain broadly stable in Q4 and Q1, as the effects of easing trade tensions lead to reduced demand for CHF as a haven asset, but the US dollar itself deteriorates.
Offsetting ECB and FOMC easing is likely to make for uninspiring EURUSD price action in Q4, although the more limited room for rate cuts by the ECB provides a minor source of strength for the euro.
The main theme of our updated G10 views is a moderately weaker US dollar, due to the US economy finally “catching down” to the rest of the G10.
Ranko Berich, Head of Market Analysis at Monex Europe, talks to Estrategias de inversion at the Madrid Stock Exchange about the greatest current risk to the eurozone economy… the US-China trade war.
The dollar sold off last night, as the Federal Reserve cut rates by 25 basis points but signalled an end to its current, short easing cycle, and Gross Domestic Product data for the third quarter printed well above expectations.