USD: Trade deals are good news for risk assets – ING
|Equity markets are trading higher around the world on news that President Trump has announced a trade deal between the US and Japan, ING's FX analyst Chris Turner notes.
Price action has been poor
"The deal is being pitched as a 'win-win' in that US tariffs on Japanese goods – including autos – are 'only' 15% compared to the 25%+ previously threatened, while Japan is said to have committed to purchasing US planes and rice, and rather unbelievably, to establishing a $550bn sovereign wealth fund that would invest in the US under the direction of President Trump. Let's see how far that idea progresses."
"Elsewhere, we note industrial metals continuing to rally and the terms of trade rising for currencies like the Australian dollar, Brazilian real and South African rand. These currencies also act as a hedge should Fed Chair Powell be ousted and the commodity sector be viewed as an inflation hedge in the event of premature Fed easing. This trend may have legs."
"In terms of the big dollar, price action has been poor. This week's losses could somehow represent a catch-up with some lower US yields seen last week or merely represent some investor re-allocation out of the US and into say Europe or Emerging Markets on a global growth play. For today, the US focus will be on the June existing home sales release. Some are thinking that the housing sector will be the next shoe to drop in the US slowdown. However, our team sees some slight upside risk to today's data based on the recent bounce in mortgage applications. If so – and given the more mixed USD/JPY environment today – DXY could see a retracement to 98."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.