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US-Chinese trade war hurts Dollar

UK chief Brexit negotiator David Frost heads to Brussels to explore alternatives to May's Brexit plan.

Centtrip: US-Chinese trade war hurts Dollar

The Dollar suffered again overnight as fears that the Sino-US trade war will linger continue to mount, causing US Treasuries yields to slide again.

What started as a positive week for the US, has now turned again, as President Donald Trump’s softer tone indicating a trade deal with Beijing was in sight was quickly quashed by China’s Ministry of Foreign Affairs, which stated no contact had been made between the two nations.

US 10-year Treasury yields extended declines to 1.461 per cent – very close to their July 2016 low of 1.443 per cent – as the yield curve inversion highlighted the current dim economic outlook. The Dollar Index, measuring the greenback against six major currencies, dipped by 0.1 per cent before recovering to 98.013.

In the UK, political factors continued to affect the Pound as Brexit uncertainty rumbles on. Negotiations with the European Union showed a glimmer of hope yesterday when European Commission President Jean Claude Juncker stated he was ready to engage on Brexit, provided the UK puts forward suitable proposals.

Meanwhile, the opposition party was working hard to try and avoid the no-deal scenario. The most likely workaround is likely to be a legislative push towards a further extension, followed by a vote of no-confidence and a general election.

Sterling pushed towards a four-week high against the Dollar, just above 1.23, before retracing to an overnight high of 1.2297. The UK currency seems buoyed by the government’s efforts to find a solution to the Irish border issue. This, along with a substantial fiscal package that Chancellor of the Exchequer Sajid Javid is due to announce next week, should support Sterling.

In Europe, the news that a snap election in Italy could be avoided helped to firm up the fortunes of the single currency, which remained flat at 1.1097 against the Dollar.

Today there is not much on the data calendar, with the only release of note being US crude oil inventories due at 15:30 (GMT).

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