After several sessions marked by high volatility and losses for the Buck, the United States Dollar has returned to calmer waters this morning and is trading close to flat on most major currencies.
Overview
In contrast with last week’s decidedly negative tone of news, optimism seems to be the theme of the day today, following news breaks over the weekend that seemingly outlined positive progress on trade talks between the US and China.
US and Chinese officials are set for a second round of talks today in London, following May’s discussions in Geneva that – at least at the time – resulted in somewhat of a détente between the world’s two largest economies. On the front end of the docket today is rare earth minerals exports, which US officials claim have not been sped up enough to match last month’s agreement. Though US trade representative Jamieson Greer says that exports have increased, all officials have made it clear that the pace of such exports does not match what was agreed to last month, and this is likely to continue to be the major sticking point of any negotiations moving forward. Greer, along with Scott Bessent and Howard Lutnick, are in all probability going to position any small movements on discussions today as major wins, so the news flow today is likely to stay fairly positive for USD.
Though the economic calendar is quiet today, the back half of the week does see the release of both US CPI and PPI, key inflation indicators that are likely to be watched quite closely by traders. The inflationary impact of US trade policies is arguably the biggest question on strategists’ minds at the moment, so though FX flows could stay calmer today and tomorrow, Wednesday may well see a return to volatile price action.
What to Watch This Week…
- US CPI, Wednesday 8:30 AM
- US PPI, Thursday 8:30 AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
AUD ⇑
The Australian and New Zealand Dollars are the biggest winners in the G10 this morning, gaining a quarter and nearly half a percent against USD respectively. Trader optimism over US-China discussions is the key driver of the global mood today, and AUD’s traditional place as a risk barometer for the globe is very much at play at the moment. The general risk backdrop for the Antipodeans, as well, is much more benign, with most key data releases for the next few weeks already out of the way and their central bank meetings for this cycle done.
MXN ⇑
Mexican Peso, in keeping with gains on many emerging-market currencies, is trading stronger against USD this morning, coming close to its best level against the Buck in several months. Mexico’s annual inflation grew more than expected inthe data release today, showing that prices sped up their increases to 4.42% for the month of May. Banxico has shown a bias towards easing its high interest rate in its last few meetings, but this higher-than-expected inflation rate may test those plans. Core inflation, excluding food and fuel, also rose to 4.06%, a market increase from April’s figure.
