Forex- US Dollar Rises as Trade Deal Progresses

Marco Green
November 8, 2019

While U.S. stocks pared gains on the report of the restriction to the arrangement in Washington, the Dow and S&P 500 did close at untouched highs, while the Nasdaq missed a record close by under two-tenths of a point.

China and the United States have agreed to roll back tariffs on each others' goods in a "phase one" trade deal if it is completed, officials from both sides said on Thursday.

However, the White House's trade advisor, Peter Navarro, appeared to throw cold water on the idea of scaling back tariffs, telling Fox Business Network "there is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal".

No timetable was indicated, but a "phase one" deal is widely expected to include a USA pledge to scrap tariffs scheduled for December 15 on about US$156 billion (RM643.3 billion) worth of Chinese imports, including cellphones, laptop computers and toys.

The pan-European STOXX 600 opened down 0.4 per cent at 405 points, 10 ticks from its April 2015 record of 415. His comments corroborated a Reuters report that many within the Trump administration are fiercely opposed to rolling back tariffs, which was never part of the original deal outline agreed by the Chinese and U.S. presidents in October.

"Perhaps we do get the phase one deal and a detente, but when we get into next year there will be big issues that both the USA and China have big disagreements on", said James Rossiter, head of global macro strategy at TD Securities. But with operating earnings lower in a slowing economy, "the fundamental justification for this market increase is pretty weak".

Investors have few options outside of equities, with the return in money markets and long-term government debt below the rate of inflation, Kelly said.

"The real driver (of the market rally) is that investors in the United State and around the world have got little alternatives available to them because of the actions of the central banks", Kelly said, "so they're funneling money into stocks". S&P 500 futures retreated 0.1 per cent after the NY benchmark hit its highest closing level ever on Thursday.

At 1150 GMT, Brent crude was down 1.7% at $61.21 a barrel, while U.S. West Texas Intermediate crude also tumbled 1.7%, to $56.19.

The dollar held steady at 109.34 yen in Asia on Friday, close to a five-month high, and is headed for a 1.1 per cent gain for the week. The dollar rose to near three-month highs versus the yen after the news, retracing its 0.3% losses earlier in the session, as investors interpreted the comments as positive news.

The euro slipped to $1.1050, having marked a low of $1.10355 in US trade, its weakest since October 16. The dollar also gained against another safe haven, the Swiss franc, trading up 0.2% at 0.9946 franc.

The Australian dollar was seen to rise by a fifth of a percentage point in its pair with the USA dollar.

The benchmark 10-year U.S Treasury note fell 31/32 in price to push its yield up to 1.919 per cent.

US gold futures settled down 1.8% at $1,466.40 an ounce.

"Global markets in general are looking toward where trade goes", said Justin Lederer, an interest rates strategist at Cantor Fitzgerald in NY. "The Chinese news has already been factored in and markets are very tentative pricing in headlines that don't necessarily add much", said Simon Harvey, FX market strategist, at Monex Europe in London.

Other reports by Click Lancashire

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