US Dollar Strengthen As Pound Euro Yuan and AUD Drop On Outlook

US dollar grows as pound drops
Bill Cascade   NEW 08/09/2019 00:00:00 Forex

The US dollar continues to register solid gains, against other major currencies. The dollar has since risen to highs of 99.02, levels last seen in April of 2017, signaling weakness in other majors. 

The strength in the U.S. dollar stems from traders rushing to safe havens amidst growing concerns about the health of the global economy. The surge also comes on investors reacting to economic releases that have shown the U.S. economy might not be doing badly as initially thought.

us grows as pound euro drops

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British Pound Weakness 

In contrast, the British Pound continues to edge lower as the Brexit uncertainty continues to send jitters among traders. Prime Minister, Boris Johnson, asking Parliament to vote against any delays that would derail a hard Brexit is the latest tailwind that continues to take a toll on the pound strength.

The Prime Minister is in a race against time to ensure the U.K. moves out of the European Union before the October 31 deadline, as promised. However, growing resentment and division in the ruling party threatens to derail the entire process, a move that continues to weigh in on the pound strength amidst greenback strength. 

The British Pound is likely to remain under pressure ahead of a much-awaited parliamentary vote that will shed more light on the Brexit future. The fact that the outcome of the vote could trigger an election or an exit from the E.U. without a deal should continue to weigh in on the pound strength. There is growing concern that hard Brexit could trigger severe economic turmoil.

us grows while euro drops

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Politicians are increasingly pushing for an agreement with the E.U. An exit without a deal could trigger serious ramifications at a time when the U.K. economy appears to be showing signs of weakness as depicted by disappointing economic releases. 

Euro Weakness 

The Euro just like the Pound also continues to feel the full effects of a strengthened dollar. The currency has since dropped to two-year lows of $1.0954 as weak economic data from some of the biggest economies in the trading block continue to rattle traders. 

Weakness in the Euro could also be attributed to economic data showing seven consecutive months of contraction in the European manufacturing sector. Most traders have shunned the Euro in favor of safe havens such as the U.S. dollar and the Yen. 

Yuan-AUD Drops 

Just like the Euro and the Pound, the Chinese Yuan also continues to flirt with 11 and a half year lows of 7.18 against the dollar. Weakness on the Yuan stems from the imposition of 15% tariff on $110 billion worth of Chinese imports. Reports that the U.S. and Chinese officials are struggling to reach a trade agreement also continues to weigh in on the Yuan strength.

The Australian dollar also lost some ground against the dollar following a decision by the Reserve Bank of Australia to leave interest rates unchanged at lows of 1%. Weak economic data in recent weeks has continued to pile pressure on the AUD against the dollar. Expectations that the RBA could cut interest rates, two more times, also continues to weigh in on the AUD.

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