The U.S. dollar is mixed against major pairs. Safe havens like the Swiss franc, Japanese yen and the euro have gained against the greenback, while the Canadian and New Zealand dollars along with the pound are lower. Strong data in Europe boosted the single currency but the rally was short-lived after the Trump administration announced a review of US-EU trade that could result in a 20% tariff on European car imports.
As is often the case with central bank meetings in the era of communication-as-a-policy-tool, the Bank of England’s “decision” (read: no change) on interest rates was already telegraphed well in advance. But for the always forward-looking markets, there was still plenty to digest from this morning’s BOE statement.
Markets have calmed down since yesterday’s big risk asset selloff, but that doesn’t mean that there’s nothing exciting on the horizon for traders. Namely, tomorrow’s Bank of England meeting should provide some important insights into Mark Carney and company see policy unfolding moving forward.
The U.S. dollar has jumped to its strongest level in nearly a year, raising questions about how a strong greenback could act as a drag on debt and oil demand in much of the world. The U.S. Federal Reserve announced another rate hike a few days ago, which helped edge up the dollar to a new high for the year.
The intensifying trade tensions between the United States and China simply added to market jitters, consequently weighing heavily on emerging markets. While the prospect of higher U.S. interest rates is likely to stimulate fears of capital outflows from emerging markets, global trade concerns present a major risk.
FIFA has trumped forex so far in trade this week, with the major currencies consolidating in relatively tight ranges against one another. The U.S. dollar is consolidating against its rivals so far today, gaining ground against the commodity dollars and pound sterling but losing ground against traditional safe havens such as the yen and Swiss franc.
It is expected that the latest installment of concerns over the United States and China entering a potential trade war will encourage global stock markets to come under pressure this week. Some indications of risk aversion are already being seen in the markets, with the Japanese yen gaining as a result of market uncertainty and a number of different Asian currencies trading lower due to reduced investor appetite.