Last week has been a terrible one for President Domald Trump. His former campaign chairman Paul Manafort was found guilty on eight counts of bank and tax fraud on Tuesday, while his ex-personal lawyer Michael Cohen pleaded guilty to campaign finance violations and other charges on the same day.
The U.S. dollar is lower against most major pairs on Friday. The greenback was waiting for U.S. Federal Reserve Chair Powell’s speech at the central bank summit in Jackson Hole but in the end no new information was provided. Chair Powell reiterated the data dependency of the central bank and shared his optimism regarding inflation. The market is already pricing in two US rate hikes in 2018 and the somewhat dovish remarks from Powell did not add support to the U.S. dollar.
China is buying our oil and that could be Iran’s worst nightmare. It seems that the Chinese trade talks went nowhere, but despite that fact, China’s demand for U.S. crude oil might rise anyway. According to Reuters “China’s Unipec will resume purchases of U.S. crude oil in October after a two-month halt due to the trade dispute between the world’s two largest economies.”
As we noted yesterday ahead of today’s NFP release, “[There have been] no signs that a pickup in price pressures is imminent, [and therefore] the Federal Reserve is content to stick with its gradual, every-other-meeting rate hike schedule…”. Today’s U.S. jobs report will do little to blow the Fed off course.
Trade concerns between the world’s largest two economies returned to haunt markets on Thursday after President Trump ordered his administration to consider more than doubling previously proposed tariffs on $200 billion worth of Chinese goods. The new proposed tariffs of 25% dragged Asian equities heavily during morning trade, sending the Hang Seng Index to its lowest level since September 2017.
As anyone who was paying a modicum of attention could easily tell you, the Federal Reserve was never going to make any changes to monetary policy at today’s meeting. Instead, traders were tuning in to see any changes to the central bank’s statement and extrapolate what that may mean for interest rates moving forward.
The dollar’s choppiness has been a dominant theme for several weeks now, but as we come to the business end of this week, it could finally make a more decisive move in one or the other direction. The indecisiveness is a reflection of a tired bullish trend: market participants have been piling in on the greenback for several months amid an improving macro picture in the United States and speculation over further rate hikes from the Federal Reserve.
Contradicting reports surrounding the state of the U.S.-China trade relations are likely to create a sense of confusion across all markets, while also possibly desensitizing investors towards global trade developments.