Renewal of trade negotiations proves positive for USD


US Treasury Secretary Mnuchin said the currency manipulation issue will be a focus when discussions resume, stating his expectation that the PBoC governor is to be present for the talks. He also stated his belief that the Chinese delegation travelling to the US shows their willingness to continue to negotiate.


The single currency is trading slightly higher as traders await the ECB meeting on Thursday. While most analysts expect lower rates and added monetary stimulus, comments from ECB President Mario Draghi will also be closely monitored. The EUR’s slight climb has some analysts feeling that the movement could be a “buy the rumor, sell the fact” outcome.


The GBP/USD has continued its rally after the UK’s Prime Minister once again suffered defeat at the hands of Parliament yesterday. His call for a snap election was rejected and Parliament is now suspended for the next five weeks. PM Johnson also pledged to continue negotiating a deal, while preparing to leave without one. Data released on Monday showed that the UK economy expanded by 0.3% on a monthly basis in July - though was flat for the three months to July - and bettered market expectations.


Traders continue to exit safe haven trades as trade talks are set to begin between the US and China. Treasury yields in the US and Germany are adding to trader optimism moving forward, while JPY economic news continues to hint at a possible recession in the future.


USD is buying underpinned commodity-linked currencies such as the CAD and keeping a lid on any meaningful recovery for the Loonie. Oil prices rose for the fifth consecutive session in early trading Tuesday and climbed further beyond the $58.00/barrel mark to their highest level in almost six weeks on the back of firming expectations that OPEC and other producing countries may agree to extend output cuts to support prices.


New data out of China showed that exports unexpectedly fell in August with a large contraction for shipments to the U.S. The drop indicates further weakness in the world’s second largest economy and puts further pressure on Chinese lawmakers to announce new economic stimulus.

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