Dollar falls as the US-China trade war intensifies

The ambiguity of trade progress continues to be the dominant driver with all asset classes.  The dollar finished lower after a round of trade talks in Washington DC did not see cataclysmic outcome after President Trump delivered a tariff hike.  Global equities saw some buying, mainly because the market is pricing in some agreement being reached on the trade front along with puts from Powell, the PBOC, and Trump.  Europe takes center-stage, with the focus shifting to Germany’s first quarter GDP reading and the ZEW Survey which are expected to see a rebound and improved sentiment respectively.

USD – Trade deal progress expected

EUR – Germany GDP to rebound sharply; ZEW Survey to show improved sentiment

Oil – Supported on geopolitical risks from Iran, Venezuela and Libya


The vulnerability from trade talks saw US equities selloff strongly as fears of a prolong trade war prevented an attempt for fresh record highs.  As talks reach a climax, the market appears exhausted chasing both punitive and optimistic headlines.  The implementation of the tariff hike by the US did not derail high-level talks as talks appear poised to resume in Beijing.  Chinese goods that left ports before May 10th are not subject to the increase, thus providing a roughly small two-week window that could provide added incentive for a deal to be finalized.

Friday’s rebound stemmed from supportive comments from Treasury Secretary Steven Mnuchin that talks were constructive and his counterpart Chinese Vice Premier Liu He, who noted that talks went fairly well.  China is expected to announce countermeasures as we enter the final stages of negotiations.


The RBNZ sent the kiwi to a 6-month low after deciding to cut rates for the first times since November 2016.  The downward trend did not continue as the central bank appeared to be one and done.  Some analysts are now targeting the official cash rate to remain at the record low 1.5% through the middle of 2022.  If we do see further deterioration of data another cut is possible, but that may not happen if China gets a trade deal done and the PBOC continues to deliver more stimulus.


The Australian dollar finished slightly softer as bearish bets remain in place as expectations remain high the RBA will cut rates later this year growth remains weak and inflation stays lows.  The RBA rate decision surprised many Aussie dollar sellers that the central bank opted against an easing policy.  The Statement of Monetary Policy (SOMP) however slashed growth, consumption and investment forecasts, highlighting that we will likely see two rate cuts.

The Australian currency also saw its correlation to trade war stories increase.  While most of the week saw a risk averse theme driven by trade talks, the Australian dollar finished modestly lower.  A trade deal is expected over the next several weeks, so that means we could be nearing a key bottom for some commodity currencies.


Canada’s economy is starting to show signs of life after posting a record job gain in April.  The loonie has been battered over the last few months, despite a strong recovery with oil prices, its largest export.  The employment report could be a game changer as broad strength was seen throughout all four provinces.  The Bank of Canada may be right that the slowdown is temporary and bets for easing have come down dramatically.

Oil saw some weakness on global growth concerns, but a plethora of geopolitical risks could keep prices stable.


Gold’s safe-haven demand appears to be fluttering.  With significant moves in equities and bond yields stemming from the trade war developments, recently the yellow metal has done little to impress.  The base case that a trade deal will be reached is not doing gold any favors.  The lack of a major move higher despite a Fed that is on hold, the PBOC is actively providing fresh accommodation and central banks continue to be buying gold is frustrating bullion bulls.  It appears commodities might need to see a major rout in the dollar before rallying.  Eurozone growth could be key next week, and if we start to see better data in Europe, that might help spur dollar weakness, which could help gold.


Monday, May 13th

2:00am ET           NOK GDP q/q

3:00am ET           CZK CPI m/m

8:00am ET           INR CPI y/y

Tuesday, May 14th

2:00am ET           EUR Germany CPI y/y

3:00am ET           EUR Spain CPI y/y

3:30am ET           EUR Netherlands Q1 GDP

3:30am ET           SEK CPI y/y

4:30am ET           GBP Jobless Claims Change and ILO Unemployment Rate

4:30am ET           GBP Average Weekly Earnings

5:00am ET           EUR ZEW Germany Current Situation

5:00am ET           EUR ZEW Eurozone Survey Expectations

5:00am ET           EUR Industrial Production m/m

6:00am ET           USD NFIB Small Business Optimism

8:30pm ET           AUD Westpac Consumer Sentiment

10:00pm ET        CNY Industrial Production y/y

10:00pm ET        CNY Fixed Asset Investment ytd y/y

Wednesday, May 15th

2:00am ET           EUR Germany Q1 Preliminary GDP q/q

3:00am ET           CZK Q1 Advance GDP q/q

5:00am ET           EUR Q1 Preliminary GDP q/q

8:30am ET           USD Retail Sales m/m

8:30am ET           CAD CPI m/m

9:15am ET           USD Industrial Production m/m

10:00am ET         USD NAHB Housing Market Index

10:00am ET         USD Business Inventories m/m

10:30am ET         DOE US Crude Oil Inventories

4:00pm ET           USD Net Long-term TIC Flows

7:50pm ET           JPY PPY y/y

9:30pm ET           AUD Employment Change

Thursday, May 16th

EuroGroup Meetings

8:30am ET           USD Philly Fed Manufacturing Index

8:30am ET           USD Building Permits m/m

8:30am ET           USD Initial Jobless Claims

8:30am ET           CAD Manufacturing Sales m/m

2:00pm ET           MXN Banxico Interest Rate Decision

6:30pm ET           NZD Manufacturing PMI

Friday, May 17th

EU Finance Ministers meet in Brussels

5:00am ET           EUR Eurozone Final CPI y/y

10:00am ET         USD University of Michigan Sentiment

10:00am ET         USD Leading Index

Saturday, May 18th Australia Federal Election

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

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