U.S. Dollar Extends Weakness on China, Polls & Powell

11/19/2019 9:10 am EST

Focus: FOREX

Adam Button

Co-Owner and Managing Director, ForexLive.com

U.S. Dollar's weakness extended into Monday, while U.S. stock indices paused from their record-breaking run after reports indicated pessimism prevailed in China regarding the US-China trade talks.

Meanwhile President Trump revealed he had an unscheduled meeting with Fed chair Jay Powell where he discussed the strong U.S. dollar and negative interest rates and manufacturing. The British pound (GBP) was the leading currency against USD, reaching $1.2985 after Prime Minister Boris Johnson said each Conservative member of parliament candidate has signed a pledge to vote for his Brexit deal, further pushing opinion polls in favor of the Tories. 

The pessimistic comments were reported by CNBC's Beijing bureau chief Eunice Yoon tweeting: "China troubled after Trump said no tariff rollback (China thought there was an agreement in principle). Sino strategy now is to talk but wait on impeachment and U.S. election. Also prioritize China economic support.

The new indications emerged after weekend chatter from China highlighted 'constructive discussions' and an agreement to maintain close communication. That hardly moves the needle in terms of news but fighting it on the market side has proven to be impossible. Yet for every step forward on optimism, there's a risk of a plunge backwards if talks fall apart. And for every three or four statements from the U.S. side on the trade talks, Beijing makes one or none.

At the same time, there's a risk that trade news is overshadowing what's happening in the economy. There has been an undercurrent of stabilization in most of the world. On Friday, the U.S. retail sales control group was up 0.3% to match estimates. Overall sales were also slightly stronger at +0.3% vs the +0.2% consensus.

Broad economic concern has shifted to a focus on struggling global manufacturing. Friday's U.S. industrial production data showed a 0.8% fall compared to -0.4% expected. It's a similar story nearly everywhere but while manufacturing struggles, the consumer isn't worsening. Unless that changes, there's no reason to believe this paradigm can't extend through year-end.

Latest UK Polls

The latest figures from the UK election polls according to ICM conducted for Reuters showed the Conservatives at 42% (up 3 points) from the previous ICM poll, Labor at 32% (up 1 point), Liberal Democrats at 13% (down 2) Brexit Party at 5%, down 3 points.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -58K vs -61K prior GBP -28K vs -29K prior JPY -35K vs -27K prior CHF -15K vs -14K prior CAD +42K vs +52K prior AUD -41K vs -27K prior NZD -41K vs -27K prior
The Australian and New Zealand dollar have shown some signs of life following central bank decisions but the market is deeply sour on both. Watch the 100-day moving average in NZD/USD this week, currently about 35 pips above spot at 0.6440.

Adam Button is co-owner and managing director of ForexLive.com and a contributor at AshrafLaidi.com. You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf's Tweet on indices here.

Related Articles on FOREX

Keyword Image
US-China Trade Breakthrough?
12/05/2019 1:26 pm EST

A potential wild card gets thrown into on-again/off-again trade talks and a forex update from Adam B...