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September 25, 2019
The majority of Asian stock exchanges are slipping, but the U.S. Dollar Index tends to be flat. The latest developments in a number of geopolitical situations are in the market spotlight. The U.S. Dollar Index has moved nearly flat around the 98.48 level since opening until towards the end of the Asian session.
Amid the lack of a schedule of economic data releases, the majority of Asian stock exchanges slipped, but the currency market was still relatively calm. Market participants monitor the latest developments in preliminary discussions between the U.S. and China, as well as heated tensions in the Middle East region.
At the weekend, the U.S. Trade Representative's office released a brief statement describing the two-day negotiations with China as "productive". The Chinese Ministry of Commerce also called the same negotiations "constructive". Both sides stressed that high-level trade negotiations will take place as planned in October in Washington.
Investors welcomed the statements, as well as news that the United States had abolished tariffs for 400 Chinese products based on requests from U.S. companies. However, the majority of market participants remain unsure if an agreement will be reached in the near future.
"There are real concerns about the impact on the economy due to trade disputes," Michael McCarthy of CMC Markets was quoted as saying by Reuters, "People are likely to think that this will be a long negotiation. The longer the time (means) the greater the impact on the economy. "
Meanwhile, the Middle East is heating up again. U.S. President Donald Trump sent additional troops into the Gulf region to strengthen the armed forces of his ally, Saudi Arabia. The U.S. Secretary of State, Mike Pompeo, claims that additional troops are aimed at "prevention and protection", not to fight with Iran. Nevertheless, investors doubt it.
The price of Brent and WTI crude oil each skyrocketed to more than 0.6 percent in this morning's trading to around USD 65.21 and USD 58.86 per barrel. Commodity currencies took advantage of the opportunity to climb thin versus the Greenback, although AUD / USD and NZD / USD were unable to erase the sharp weakening suffered on Friday.
The development of U.S.-China trade negotiations and the waning of the Fed's Cut-Rate aggressiveness became the two main catalysts driving the U.S. Dollar this weekend. The U.S. dollar strengthened in the trading session due to progress in US-China trade negotiations, as well as expectations that the Fed will not reduce interest rates aggressively after yesterday's Rate Cut.
At the time of writing, the U.S. Dollar Index (DXY), which measures the strength of the USD against a group of major currencies, edged up 0.19 percent to 98.5. However, if observed in a wider range, there has been a consolidation in the price range since September 13.
Negotiators representing U.S.-China trade negotiations will resume talks starting today in Washington. The Chinese delegation was represented by Liao Min who served as the Minister of Finance of China, while the U.S. delegation was represented by Jeffrey Gerrish from the US Trade Representatives.
The meeting is considered crucial because it will seek a high-level discussion that will be the determinant of the U.S.-China trade agreement in early October. "The U.S. economy is clearly still better than other countries, I still predict the strengthening of the U.S. Dollar," said Joseph Trevisani, one of the senior analysts at FX Street New York.
Trevisani added that with Housing Starts data at a record high of 12 years, and an increase in US manufacturing output that occurred in August, the economic expansion still has support. CME Group's FedWatch shows that the percentage chance of a rate cut at the end of this year is at 64 percent. This figure is down from the previous day's level of 69 percent.
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