Dollar Higher on US-China Trade Anxiety

The US dollar is higher against major pairs on Thursday. The greenback bounced back on the back of lower unemployment claims data as the U.S. non-farm payrolls (NFP) awaits. The US-China trade deal narrative got some turbulence with non-committal statements from the US ambassador to China. The dollar is advancing despite a dovish U.S. Federal Reserve who continues to stress patience after it has paused its interest rate hike plans.

US employment has been the strongest pillar since the crisis, but weather and the government shutdown made for a disappointing report last month. American jobs are expected to rebound with a 180,000 job gain. Investors will also be looking at the average hourly earnings for signals of inflationary pressure. Given the rise in number of positions, wages are forecasted lower at a 0.2 percent rise. The dollar is mixed against majors in the first week of April as Brexit irresolution has brought high and lows to the pound.

Global growth forecasts remain under pressure as the two largest economies have not reached a full agreement and there is a lower probability of a summit being announced in the short term. The US dollar has risen as a safe haven as geopolitics keeps having a negative impact on economic growth.

Brexit Drama Pressures Pound

The GBP/USD fell 0.54 percent on Thursday after a marathon session between the Conservative and Labour teams said little on the nature of the talks other than they will be ongoing. Some sources are pointing out that the talks have not been constructive, which remains a Brexit syndrome with a fast approaching deadline.

A Brexit extension is the most likely scenario from here, the length of which could be decided by Labour backing Theresa May’s deal in which case it would be a short one, or no deal passed and the UK asking for a longer extension the length of which would have to be decided by the EU and which could be the end of Brexit if a new referendum, new elections or both are likely scenarios.

Brexit uncertainty is weighing heavily on the currency and with geopolitical risk on the rise the US dollar has appreciated as a safe haven in order for investors to limit their exposures.

Oil Lower as Us-China Trade Hits Speed Bump

Oil prices fell on Thursday as the US dollar gained strength on positive jobs data, but also the US-China talks hitting a speed bump triggering anxiety amongst investors. Despite rumours that a summit date would be announced today officials from the White Housed denied those speculations. A summit in April is looking unlikely despite the comments from both sides on how well the negotiations are going. After much talk there is still nothing to show for it, which is once again putting downward pressure on energy demand going forward.

West Texas Intermediate graph

Oil traded lower despite Libya about to engage in armed conflict and the ongoing sanctions against Venezuela and Iran further reducing supply. The OPEC+ has been the major stabilizing factor of energy prices with their production cut agreement. The group is looking to extend the supply restrictions in order to soak up excess crude in the market.

Brent crude graph

Growing US shale production could force OPEC+ to extend their deal beyond the end of 2019, but it remains to be seen how much longer the energy producing members can limit their revenue.

Gold Gains Slightly Despite US Dollar Strength

Gold managed to eke out a gain on Thursday despite the US dollar having a moment ahead of the release of the U.S. non-farm payrolls (NFP). The report is expected to show a strong gain after last month’s disappointing data with the government shutdown and poor data to blame for the underperformance.

With the US-China trade hitting a small speed bump and Brexit drama affecting the market, gold remains bid as investors see it as a safe haven. The Fed will remain out of the picture for 2019 as market forces and White House pressure will keep it in the sidelines. The yellow metal is supported by major risk events that remain unsolved and with little details for investors to trade on with is a positive for the metal at the moment.

Stocks Mixed on Trade Anxiety

Global stocks were mostly on positive territory ahead of the last trading session of the week. The US-China trade talks remain a decisive factor, and while this week’s setback could be a minor delay the comments from both sides has been positive that a deal is within striking distance. President Trump said that while trade talks are coming along well, if it’s not a great deal, he won’t agree to it.

Tesla traded lower after disclosing delivery numbers that showed there was a slowdown in its efforts to meet client orders. The stock lost 9 percent as there are mounting concerns that the electric auto maker can meet the logistical challenges of having a popular, but lower priced product.

Ford sales disappointed as it struggled to move certain car models in its portfolio. Trucks, vans and SUVs continued to gain at a healthy pace, but sedans suffered and put in question the ability of the automaker to recover its record setting pace. Ford is looking to adapt by cutting its lower cost offerings and focus on higher priced, more tech heavy packages.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza