Dollar remains firm as markets still price in a trade deal

The last leg of the trade deal marathon between China and US is getting messy following Sunday’s trade jabs.  In classic Art of the Deal style, President Trump is ratcheting up the pressure on China by imposing a deadline this Friday for a deal to be made or steps secured to outline a final meeting.  China is pushing back and may delay their trip to the US for the next round of talks. The base case remains that a deal will get done, but we are seeing risk come off as markets pretty much had fully priced in a trade deal.

Another round of escalation in trade tensions could put the dent back into risk appetite, but so far stock and currency markets have retraced pretty much 50% of the move.  China’s motivation to get a deal done have become further solidified as expectations are slightly in favor of President Trump to be re-elected. Last year, many believed it was unlikely Trump would win again in 2020 and that China would wait until a new administration took office.

NZD – Remains weakest commodity currency

Oil – Higher on US warship deployment and supply worries  

Gold – Higher on trade worries


The Australian dollar and the kiwi both sold off at the open on President Trump’s tariff threat.  While most risk assets have already recovered roughly half of the move, we are seeing the kiwi remain near its lows.  The reason is because the Reserve Bank of New Zealand is expected to cut rates at its May 8th policy meeting as inflation and economic activity have continued to deteriorate even further.


Oil prices recovered earlier losses as markets overreacted to the risk-off move that stemmed from President Trump’s trade threat.  Crude prices are about 7% softer since the end of last month on expectations the OPEC + production rally could be over as production is about to pick up from the Saudis, Russians and Americans.

The ending of Iranian waivers over oil sanctions is seeing an escalation on the banter side from the US.  US National Security Adviser Bolton noted US warships being closely monitored in the Persian Gulf waters, South of Iran.  The movement of ships is in retaliation to Iranian movements that implied they were preparing for a possible attack.

Oil’s pullback is starting to see some support on geopolitical risks and technical buying.


The precious metal caught a small bid in the strong risk-off move that stemmed from the trade setback between the US and China.  The limited rise in gold prices show how vulnerable the commodity remains.  The base case is still for a trade deal to be done and that has been the main deterrent for higher prices.


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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya