USD Kicks Off Monday’s Trading Session On A Low After Last Week’s Bullish Performance
Last week saw the US dollar surge, especially on Monday as investors hardened their expectations of interest rate cuts by the Federal Reserve. It came with the rising tensions in the Middle East.
The performance of the US dollar last week seems to have mainly been fueled by the interest rate cuts expectations and thus focused heavily on central bank decisions to be made over the next two weeks.
The USD’s rally pushed it past the 108 level against the Japanese Yen, which is one of the major haven currencies in the world. Interestingly, the tensions in the Middle East seem to support the performance of safe-haven currencies.
The USD gained an overall 0.35% last week, but that performance barely influenced the performance of the US dollar Index which remained at around the 97.179 range. The US dollar appears to be locked in a range-bound trend since Friday, with the price at 97.16 at the time of this press.
Traders have currently adopted a cautious stance with their investments on account of factors such as interest rate cut expectations, Middle East tensions, and China-U.S. trade negotiations.
There is also the rising geopolitical temperature, especially related to oil trade. The latest incident involves Iran’s decision to seize a tanker on Friday in the Strait of Hormuz, leading to further tensions.
The US dollar's bearish start this week fuels a surge in the EUR/USD's performance
The EUR/USD is off to some bullish momentum on Monday this week with the currency pair surging from as low as 1.1207 to around to a high of 1.1225 at the time of this press. This performance is mainly attributed to the U.S. dollar's slide after the New York Federal Reserve’s statement that the best course of action is to implement preventative measures on rates rather than waiting for disaster.
The comments which were made by John Williams led to a dip in the U.S. yields to daily lows, while the U.S. dollar's performance continued to tank. The EUR/USD hit Monday’s highs at around 1.1225 before turning bearish.
The decline after the highs may have been influenced by a recent Bloomberg report stating that the European Central Bank plans to make changes to its inflation target. The report may have weakened the Euro, thus giving the USD a chance to gain some ground.
This week will likely be characterized by more volatility considering that the European Central Bank is scheduled to hold a meeting on Thursday. The Bank of Japan will also have a policy meeting, and so will the Federal Reserve in the coming week.
On the trade and economic data front, eCommerce giant Amazon and bellwether companies such as Caterpillar Inc. are scheduled to release their earnings reports.
Meanwhile, in Asia, there have been reports that Chinese firms have been gearing up to purchase farm products from the U.S. If the reports are true, then they indicate easing tensions between the two countries after the trade war which graced the headlines for the better part of 2019.