Investors Trade Tactically until Tariff Noise Eases. USD Seeks Bottom

04/10/2018 12:02 pm EST

Focus: CURRENCIES

Robert Savage

Partner & CEO, CCTrack Solutions

Investors stick to growth and inflation to trade tactically, until the noise over talks and tariffs subsides. The USD is stuck looking for a bottom and as a risk barometer with the 55-day support at 89.77 looking important, writes Bob Savage, CEO of Track Research.

China's Xi Jinping wins the beauty contest overnight, with no talk about trade wars, markets rally in relief.

China gains further credibility as a valid global leader while Trump sees further erosion – with the raids on his personal lawyer’s offices now linked to tax issues hanging another cloud over his presidency.

Xi pledged to open up more of the Chinese economy and called for respecting core interests of other countries, in a speech on Tuesday at the Boao Forum. That came after President Trump said Monday his administration will “probably” come to an agreement with China to resolve the trade dispute.

Headlines into Europe are less encouraging as the U.S.-China talks stall over high-tech and as the U.S. rejects China’s offer to cut the trade deficit by $50 billion. The world is also waiting for Trump's promised response to Syria – with oil higher again today and with the Iran nuclear deal renewal for May in doubt.

The other big focus ahead will be on the Congressional grilling of Facebook (FB) Mark Zuckerberg today – as the FAANG trade faces government regulation fears head on.

As equity volatility subsides, hedging returns as the work for investors – and Russian ruble (USD/RUB) may be the best example of this with the drop post the new sanctions over 8% in four days. The central bank hasn’t stepped in even as the tumble is the biggest since Feb. 2015.

The other mover in G10 space of note – Norwegian krone (USD/NOK), off 0.4% to the USD and 0.3% to the euro (EUR/NOK) as its inflation misses expectations casting doubt on tightening plans from the Norges Bank.

The other key story for today was in the OECD CLIs which point to slowing growth momentum in Germany, France, Italy and the Eurozone in general.

Bottom line – as the world hosts a beauty contest for Europe, China and the U.S. to lead a new global order, the investing community sticks to growth and inflation to trade tactically, at least until the noise over talks and tariffs subsides.

That leaves the USD stuck looking for a bottom and as a perverse barometer for risk with the 55-day support at 89.77 looking important.

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