US Dollar May Extend Recovery as Trade War Sours Market Mood

TALKING POINTS – US DOLLAR, TRADE WAR, AUSTRALIAN DOLLAR, EURO, DRAGHI

  • US Dollar up on haven flows as China talks away from trade talks
  • Australian and NZ Dollars suffer outsized losses amid risk aversion
  • Euro unlikely to find lasting direction cues as ECB’s Draghi speaks

The US Dollar rose at the start of the trading week, building on Friday’s spirited recovery. Risk aversion seemed to be driving force behind the advance after China walked away from trade talks with the US, stocking trade war escalation fears.

Officials in Beijing balked after US President Donald Trump and company opted to press ahead with $200 billion in tariffs on Chinese imports last week. The sentiment-linked Australian, Canadian and New Zealand Dollars suffered outsized losses.

Pre-positioning ahead of the upcoming FOMC meeting may have played a part as well. Short-term interbank lending rates jumped to a decade high in Hong Kong trade, suggesting financial markets might be starting to look past tactical considerations that led USD lower last week to reconsider the macro picture.

A speech from ECB President Mario Draghi

Article source: https://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2018/09/24/US-Dollar-May-Extend-Recovery-as-Trade-War-Sours-Market-Mood.html