USD slides as trade fears ease – Scotiabank
The USD continues to retreat, leaving the DXY more than 2% below Monday’s peak, Scotiabank's Chief FX Strategist Shaun Osborne notes.
USD trades broadly lower
"There is little fresh news to explain the US Dollar’s (USD) slide. Rather, investors are ditching long USD positions as trade war risks ease, at least for the moment. Global stocks are soft and major bond markets are firmer, with Treasurys underperforming slightly. Commodities are trading a little lower overall on the session. Generally, soft stocks, relatively firmer US yields and weak commodities would all tilt risks towards a somewhat stronger USD. But that’s not the case today."
"This is perhaps where the preponderance of long USD positioning evident in recent data helps explain price action. Also, technical signals are leaning quite obviously bearish for the DXY on the week so far, given the scale of the sell-off, but it’s hard to buy into the idea of a sharp USD fall with trade war risks clearly still seemingly high. Beyond recent developments, President Trump has yet to confront European allies with tariffs—something that he has promised is 'absolutely' coming—and investors should not get too comfortable with the appearance of Trump rolling over easily after minimal concessions from Mexico and Canada won temporary reprieves."
"More volatility seems very likely across markets in the coming weeks as the Trump team tries to reset the global trade picture. US data releases this morning include ADP jobs, final Services and Composite PMIs and the January Services ISM data. Fed speakers include Barkin, Goolsbee, Bowman and Jefferson."
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FXStreet Insights Team
FXStreet
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