US Dollar lips As China-U.S. Trade Talk Face Challenge
The US dollar experienced a slight decline on Wednesday Morning as the Asian markets opened and just one day after the U.S. stock market turned bearish on Tuesday.
The new roadblock that the two sides faced is the difficulty of coming up with a schedule that fits both the U.S. and Chinese officials. This has, in turn, revived the uncertainty that prevailed when the two countries were bent on combating each other through their trade war.
The US dollar's decline was also fueled by unfavorable market data released by the Institute of Supply Management. The data indicated that the U.S. purchasing managers’ index dropped to 49.1 points in August. Any reading below 50 points is considered a contraction.
The declining market data also fuels the likelihood of the U.S. Federal Reserve implementing economic stimulation policies such as interest rate cuts later in the year.
The unfavorable economic data and the Sino-U.S. scheduling issues contributed to the dollar’s decline on Wednesday. The dollar index dropped to 98.94 after a 0.06% slippage by 01:15 GMT and its bearish momentum continued throughout the rest of the day.
The US dollar index traded as high as 98.95 on Wednesday morning before embarking on its bearish downtrend. The day’s low came in at 98.39 before closing at 98.40. Meanwhile, the impact of the dollar’s decline was also well pronounced in the EUR/USD currency exchange rate which turned bearish, indicating the weakening dollar’s performance against the Euro.
The EUR/USD exchange rate had its day’s low at around 1.0972 on Wednesday morning before surging to the day’s high at 1.1039 as the Euro grew stronger against the dollar. The currency pair traded at 1.1032 at the time of this press.
The Sterling Pound’s performance
Investors have also kept an eye out for the Sterling Pound, especially with the U.K. parliament's decision to take a vote on a Brexit delay. This delay may have eased the pressure on the Pound and encouraged investors to soften their stance on the Pound at least for now. This contributed to its momentum against the US dollar even as grew weaker.
Nick Twidale, a director at Xchainge, a Sidney-based forex brokerage, stated that the decision by British lawmakers to present the Brexit delay proposal represents an opportunity for the Pound to gain some ground. Brexit was initially supposed to happen in March this year, but it was extended to October. Members of Parliament are now backing the proposal to delay the event until January 2019.
Another Brexit delay might present the much-needed opportunity for the U.K. to finally draft up a favorable E.U. exit deal after previous failed attempts. A soft Brexit will be favorable to the Pound’s performance which has been quite poor for the past few months as the prospects of a hard Brexit increased.
The Pound plummeted below the $1.20 level, thus entering territories where it last traded in 2016. However, it is not yet out of the woods because there is still a cloud of uncertainty hovering over the Brexit issue.