Fundamental Analysis

Dollar Index Retreats from a one-year high Post Trump Comments

July 20, 2018
Equities
The Dow Jones Industrial Average ended a five-day winning streak as trade tensions escalate. The Index fell from a one-month high of 25190 to settle at 25064. The weak performance continued during the Asian session, and the Dow Jones traded below 25000. SPX500 and Tech-heavy Nasdaq Composite lost 0.4% to close at 2804 and 7825 respectively. Trump declared in a tweet that the EU took advantage of the US, but this will not continue for long. His tweet came as Google got slapped with a $5 billion fine by the EU.
USD
The dollar index which measures the strength of the greenback against a basket of currencies retreated from a one-year high of 95.67 after the comments of President Donald Trump. He said that higher interest rates and a stronger dollar put the US at a disadvantage versus others. He also mentioned the depreciation of the Chinese Yuan against the United States dollar by saying that the Yuan is dropping like a rock. Since the elections, Trump revealed that he prefers a weaker dollar. USDJPY tumbled from a six-month high of 113.17 to test a one-week low of 112.06. Also, EURUSD bounced-off a three-week low of $1.1575 to settle higher at $1.1641.
GBP
The British pound slumped to a ten-month low of $1.2957 against the United States dollar on soft economic data. The sterling lost more than one percent this week, as the weak economic reports reduced the chances of an interest rate hike by the Bank of England in August. Moreover, the uncertainty regarding the Brexit is weighing on the currency. If the weak performance persists today, GBPUSD will set its largest weekly-drop since late April.
CAD
The Canadian dollar fell to a three-week low against the United States dollar ahead of key economic data. The Bank of Canada raised interest rates last week from 1.25% to 1.50%, but the dovish tone of the governor weakened the loonie. Governor Poloz declared in his press conference last week that future rate moves will be data dependent. The retail sales figures for May and the Consumer Price Index for June are due today.
Metals
Gold prices fell to a one-year low of $1211, but the comments from President Donald Trump boosted gold prices. The strong dollar and higher US Treasury yields pressured the price of the precious metal for the past four months. The gold ounce recovered to trade at a high of $1224 during the Asian session. The silver ounce also traded at a one-year low of $15.17 and recovered to a high of $15.40. Silver prices are about to post the longest weekly losing streak since late 2015.
Oil
Oil prices rose during the Asian session buoyed by the news that the Kingdom of Saudi Arabia will not flood the oil markets. The oil exports from the Kingdom will drop by 100,000 barrels per day in August as per the Kingdom’s OPEC governor. Brent oil rose from $72.52 to trade at a high of $73.11 whereas the West Texas Intermediate rose to a high of $70.12 from $69.32. The US energy services firm Baker Hughes will report the US oil rig count later today.

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