Dollar falls broadly on renewed U.S.-China trade tension

Market Review - 03/12/2019  23:31GMT  

Dollar falls broadly on renewed U.S.-China trade tension

The greenback ended lower across the board on Tuesday on renewed U.S.-China trade concerns after U.S. President Donald Trump said a trade deal with China may be delayed until after the 2020 U.S. presidential election together with U.S. Commerce Secretary Wilbur Ross' remarks that planned tariffs on Chinese imports will be imposed on December 15th unless there is a major breakthrough in trade negotiations which triggered selloff in U.S. Treasury yields, where the benchmark 10-year was down 13.9 basis points, at 1.6968%, posting the largest daily drop since May 2018 as well as U.S. equities, where all three indices were down more than 1%.   
  
Reuters reported U.S. President Donald Trump said on Tuesday he had no deadline for reaching a trade agreement with China and it might be better to wait until after the U.S. presidential election in November 2020.   "I have no deadline, no. In some ways I think I think it's better to wait until after the election with China," Trump told reporters in London where he was due to attend a meeting of NATO leaders.   "But they want to make a deal now, and we'll see whether or not the deal's going to be right, it's got to be right."  

And U.S. Commerce Secretary Wilbur Ross on Tuesday told CNBC that President Donald Trump's objectives on a trade deal with China have not changed and that Trump is under no time pressure to complete a deal.   Ross also said that planned tariffs on Chinese imports will be imposed on Dec. 15 unless there is some real reason to postpone, such as substantive progress in talks. He said that he expects staff-level talks with China to continue but there are no high-level meetings scheduled.   
  
Versus the Japanese yen, although dollar recovered to 109.20 in Asia after Monday's selloff, price met renewed selling there and later dropped to session lows of 108.49 in New York afternoon on active safe-haven jpy buying after U.S. President Donald Trump's negative trade comments together with sharp fall in U.S. Treasury yields and decline in U.S. equities.  
  
Although the single currency retreated to 1.1072 in Asian morning, price rebounded in tandem with sterling to 1.1086 in European morning before falling to 1.1066 on cross-selling in euro. However, the pair then gained to session highs at 1.1093 in New York on renewed usd's weakness and then swung broadly sideways.  
  
The British pound went through a volatile session. Although cable retreated to 1.2928 in Australia and then moved sideways in Asia, the pair gathered momentum and intra-day rise accelerated at European open and rallied to 1.2994 after UK election poll by Kantar showed that Prime Minister Boris Johnson's Conservative Party have widened their lead against opposition Labour Party by 12 points together with upbeat UK construction PMI before retreating to 1.2972. The pair then rallied to a 5-week high at 1.3011 in New York and then weakened to 1.2990 on profit-taking.  
  
Reuters reported British Prime Minister Boris Johnson's Conservatives have increased their lead over the opposition Labour Party slightly over the last week to 12 points, a survey by Kantar showed on Tuesday, ahead of a Dec. 12 election.   The poll put support for the Conservatives at 44%, up one point from a week earlier, while Labour was unchanged on 32%. The pro-European Union Liberal Democrats were up one point on 15%, while the Brexit Party was down one point on 2%.    
Kantar surveyed 1,096 people online between Nov. 28 and Dec. 2.   While the pace of decline in British construction eased last month but the sector remained a long way from a return to growth as Brexit and election uncertainty continued to weigh, a survey showed on Tuesday.   
  
The IHS Markit/CIPS UK Construction Purchasing Mangers' Index (PMI) rose to 45.3 from 44.2 in October, a four-month high that was above all forecasts in a Reuters poll of economists that had pointed to a reading of 44.5.   
  
Data to be released on Wednesday :  
  
Australia AIG services index, GDP, capital expenditure, Japan Jibun Bank services PMI, China Caixin services PMI, Italy Markit services PMI, France Markit services PMI, Germany Markit services PMI, EU Markit services PMI, UK Markit services PMI, U.S. MBA mortgage applications, ADP employment change, Markit services PMI, ISM non-manufacturing PMI, and Canada labour productivity rate, Bank of Canada interest rate decision.