US Dollar is Limping Towards a T-Junction

. 4 min read

Overview:

  • The DXY Index is sliding lower, down 0.15% as global sentiment turns bearish on the USD
  • GBP/USD is trading on the optimistic sentiment of a Brexit breakthrough and trading higher ahead of GDP figure
  • WTI crude oil steadies near 2019 high, after strengthening 7.5% month to date

Highlight:

The shared currency continues its recovery from 20-month low and ahead of a crucial ECB meeting and amidst a general USD weakness. The European Central Bank is not expected to divert from its current monetary policy – growth within the bloc has been uninspiring so far. Germany is in a technical recession, and with new trade tension brewing between the US and EU, we expect the EUR/USD pair to resume its bearish path.

US DOLLAR

The US dollar is struggling across the board for the second successive session. The DXY Index is down 0.15% after news emerged that the market is set to witness yet another trade “war”. After the questionable status of NAFTA/USMCA, and the US-China almost-there trade deal, the US Administration has switched its attention towards the EU.

The US government has started to make a list of EU imports (blue-veined cheese and wine included) which will be subject to additional taxes. The move comes on the back of WTO findings that EU subsidies to Airbus are causing “adverse effects” to the US. Traditional safe-haven assets are in demand with the Japanese Yen and gold trading higher.  The calendar is light today, and we should expect cautious moves as markets approach a T-junction. UK GDP, ECB meeting and US CPI and FOMC minutes are on the slate for tomorrow.

BRITISH POUND

The GBP/USD is moving higher despite a Brexit deadlock. The market is pricing in a positive conclusion from tomorrow’s EU summit. There is hope that the EU and UK can avoid a no-deal Brexit and find a compromise for a soft and smooth exit. Volatility is expected to pick up with heavy duty data due tomorrow: The market will have the opportunity to assess the health of the British economy with the release of GDP and manufacturing numbers.

EURO

The Euro continues its ascend towards the 1.13 handle in quiet trading. Italian retail sales in February increased by 0.1% from the prior month but failed to inspire heavy trading activity. EUR/USD moves come on the back of positional adjustments ahead of ECB meeting and press conference tomorrow. The central bank is expected to keep intact its current monetary policy, as the block continues to generate weak economic data and muted inflation.

CANADIAN DOLLAR

The Canadian dollar firmed further within a narrow trading band, fetching 75 US cents this morning. Recent USD/CAD moves are being driven by a combination of overall weakness in the buck and higher oil prices. The pair is expected to continue at current levels as the market assess the impact of potential tit-for-tat trade tariffs between the EU and the US.

AUSTRALIAN DOLLAR

Consumers have been raiding their savings and dipping into debt absent decent wage growth over the past few years.

The NZDAUD is trading just above 11-week lows of  0.9456 as the spectre of RBNZ interest rate cuts continues to weigh on the Kiwi.

JAPANESE YEN

The US dollar-Japanese yen is finding it hard to halt its losing streak and is now trading near its lowest level five days. There is fear of a full-blown trade war now between the EU and the US. Trade tensions, geopolitical risks and expectation of dovish FOMC minutes are all at play and will be weighing on the greenback.

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