The United States Dollar managed to hold a steady position above what appeared to be a one-month low against its rivals this Wednesday. As expected, everything was caused by the wave of uncertainty surrounding the progress of the talks between the US and the Chinese governments, regarding the trade war.
So far this week, the dollar was under serious pressure, after data from the eurozone, as well as solid survey figures from China, raised hopes that the global economy could pick up some traction in 2020, while increasing the demand for other currencies.
On Monday and Tuesday, the greenback fell by 1%, reaching a one-month low, when compared with its rivals, before the latest news regarding the trade war made the rounds online.
A lot of uncertainty caused by the trade war
The sentiment was affected by Donald Trump’s latest statement, as he claimed that there’s no deadline for an agreement with the Chinese government so far. Additionally, global trade frictions were already weakened, as several economies are trying to find their footing.
“There is so much uncertainty with regards to trade and the economic outlook, and in that environment, investors are flocking to the currency which offers the highest interest rate and that is the dollar,” reveals Nordea’s senior FX strategist, Morten Lund.
This Wednesday, in early trading, the dollar was around at 97.764, above Tuesday’s low of 97.664. As a side note, the latter is the lowest level, ever since November 11.
According to more market analysts, the future isn’t very bright for the United States Dollar. As long as the U.S. economic data shows a sharp deceleration, while expectations of cuts will grow sharply, it could seriously weaken. Also, money market futures are indicating a rate cut of around one-quarterer point by July 2020.
Mixed reactions from other currencies
Nevertheless, it was the Australian Dollar that registered the biggest loss against its United States counterpart, falling 0.5% versus the greenback, following a relatively disappointing third quarter growth, but also retracing a 1.5% cumulative gain through the last two sessions.
As for other currencies, the Japanese Yen managed to stood up, maintaining itself at 108.60 versus the USD, being close to reaching its strongest level since November 22.
Finally, the Swiss franc remained at 0.9875 versus the dollar, very close to its highest level, reached on November 4.
Both Swiss and Japanese currencies maintain their status of safe-havens during such times of uncertainty, additionally fulfilled by the neverending negotiations between the United States and China. However, it will be very interesting to watch their evolution as well, as soon as an agreement is reached by the two governments.