Dollar Weakens Amid Talk Of Currency Pact With China

Dollar Weakens Amid Talk Of Currency Pact With China

U.S. may rekindle currency pact as part of trade talks

As U.S.-China trade negotiations are scheduled to resume later today, albeit with damped down expectations of any broad trade framework agreement, speculation abounds in the U.S. press that the U.S. will reintroduce a previously agreed currency accord with China, which could suspend the introduction of the next set of tariffs next week. The accord was agreed on in February, before talks broke down, and could be the first step toward more detailed, deeper discussions going forward.

In reaction, USD/CNH fell as much as 0.55% to a more than two week low of 7.0990, and is possibly looking to test the 55-day moving average at 7.08960. The move filtered across the other currency pairs with the U.S. dollar under pressure.EUR/USD rose 0.19% to 1.0991 while AUD/USD jumped 0.34% to 0.6745. Even the beleaguered pound gained some respite, with GBP/USD rising 0.20% to 1.2230 and facing the first up-day this week.

USD/CNH Daily Chart

USDCNH DailyUSDCNH Daily

U.S. growth forecast downgraded

The Atlanta Fed has downgraded its Q3 growth forecast to 1.7% from 1.8% set on October 4 after the release of wholesale trade data yesterday pushed the expected contribution of inventory investment to GDP from 0.12% to 0.01%. The latest Bloomberg survey has Q3 GDP pegged at 2.0%, with the data scheduled for release on October 30, a day before the next FOMC meeting. Market pricing is allotting an 88% chance of another 25 bps rate cut at that meeting.

UK production data on tap

German trade data for August is expected to show a narrowing of the surplus to EUR19.1 billion from EUR20.2 billion as a result of a 1.0% monthly drop in exports. From the UK we get to see manufacturing and industrial production data for August. IP is seen falling 0.1% m/m after a 0.1% gain in July while the manufacturing side is expected to be flat month-on-month. The UK’s goods trade deficit is seen widening to GBP10.0 billion from GBP9.14 billion the previous month. A speech from Bank of England’s Carney rounds off the UK events.

U.S. consumer prices are expected to rise 1.8%y/y in September, a mild acceleration from August’s +1.7% and could be welcome news to Fed Chairman Powell, who said this week that the Fed needs inflation closer to 2%. Fed’s Kashkari and Mester are scheduled to speak later in the day.

Original Post

Dollar Weakens Amid Talk Of Currency Pact With China

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.