Fundamental Analysis

U.S. Dollar extended losses After Trump’s Comments

July 23, 2018
Equities
Major U.S. indices ended slightly lower on Friday after Trump’s comments. Trump declared on Friday that he is ready to impose tariffs on all $500 billion of US imports from China. The Dow Jones Industrial Average fell 0.1% to 25058, SPX500 was also down 0.1% to settle at 2801, and the tech-heavy Nasdaq composite dropped by 0.1% to finish lower at 7820. Since Trump was elected the stock market rose to record highs which can give the president more room to take actions to reach a fair trade deal. In addition to the trade war headlines, the stock market will be vulnerable to key earnings releases this week.
USD
The dollar index which measures the strength of the greenback against a basket of currencies tested a two-week low of 94.21 during the Asian session as the market digests Trump’s currency comments. For the second consecutive day, Trump criticized the strength of the US dollar and the high rates which are granting advantages to America’s rivals. The market reacted fast to his comments, and the dollar was weaker across the board. USDJPY fell from a six-month high of 113.17 to trade at a low of 110.75 during the Asian session. EURUSD bounced-off a three-week low of $1.1575 to trade at a high of 1.1750 ahead of ECB’s meeting on Thursday. The dollar weakness supported GBPUSD from having its worst week in months as the pair rebounded from a ten-month low of 1.2957 to end the week at $1.3126, down less than one percent.
Metals
Gold prices bounced-off a one year low of $1211 supported by Trump’s comments. The US treasury yields rose to a multi-year high this year as the Fed is on the course to reach neutral interest rate levels which added pressure to the non-yielding bullion. Gold ounce traded at a high of $1234 during the Asian session. On the other hand, the Silver ounce ended lower for the sixth consecutive. However, the Silver ounce found support at a one-year low of $15.20 and bounced to a high of $15.48.
Oil
Oil prices were almost flat during the Asian session despite the Rouhani-Trump clash. Iran’s president Rouhani warned Trump by saying “don’t play with the lion’s tail.” Trump responded with a tweet threatening Rouhani and Iran. The rising geopolitical tension could provide support to the oil prices. The West Texas Intermediate traded at a high of $68.32 whereas Brent traded at a high of 73.20.

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