US Dollar Strengthens Slightly Overnight on Renewed Optimism about Trade Talks

Xe Corporate APAC

October 9, 2019 2 min read

The AUDUSD opens lower at 0.6727 and the NZDUSD opens lower at 0.6292 this morning.

The USD strengthened mildly overnight, pulling both the AUDUSD and NZDUSD lower, on renewed optimism about upcoming US-China trade talks.

It was reported that China is open to reaching a partial trade deal with the US, but they aren’t optimistic about securing a broad agreement to end the trade war. They would accept a limited deal as long as President Trump does not impose any more tariffs and, in return, China would offer non-core concessions like purchases of agricultural products without giving in on major sticking points.

The US Federal Reserve September monetary policy meeting minutes were released overnight – they cut rates by 0.25% at this meeting. Most participants felt a 0.25% rate cut was necessary to sustain the economy expansion and mitigate downside risks. Some expressed concerns that the markets expect more interest rate cuts than are appropriate, while others preferred a 0.50% cut and pointed out that empirical models showed a notable increase in the likelihood of a recession in the medium term.

The markets continue to forecast further interest rate cuts by the US Fed, with the next meeting scheduled for 30-31 October.

The GBP went on a roller coaster ride overnight. It jumped on reports of a breakthrough on the Irish backstop issue and then gave up its gains as hopes of progress were subsequently dashed.

The Melbourne Institute Inflation Expectations figures are tentatively scheduled for released at 11:30am (AEDT).

Global equity markets were higher on the day - Dow +0.8%, S&P 500 +1.0%, FTSE +0.3%, DAX +1.0%, CAC +0.8%, Nikkei -0.6%, Shanghai +0.4%.

Gold prices rose 0.5% higher to USD$1,507 an ounce. WTI Crude Oil prices gained 0.4% to US$52.57 per barrel.

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