USD Weekly Review (September 17-21)
The Greenback is currently the second biggest loser this week (as of 5:00 pm GMT), which is a repeat of last week’s disappointing performance.
The Greenback’s price action looks messy, but if we strip USD/JPY and USD/CHF from the overlay, then we get a clearer picture.
Anyhow, the Greenback had a weak start. And as noted in Monday’s Asian session recap, that’s because of news over the weekend that the U.S. may announce another round of anti-China tariffs on Monday, as well as news that China may abandon trade talks if the U.S. does impose fresh tariffs.
The Greenback’s weakness then intensified during Monday’s London session. And that was apparently because of Chinese Foreign Ministry Spokesperson Geng Shuang’s warning that:
“[I]f the US introduces any new tariff measures to China, China will have to take necessary counter-measures and resolutely safeguard our legitimate rights and interests.”
More USD bears also came out of the woods when Trump tweeted the following:
The Greenback would finally get a chance to lick its wounds when the U.S. announced a fresh round of tariffs, likely because of short-covering.
However, only a 10% tariff was imposed on around $200 billion worth of Chinese goods, but will be eventually increased to 25% by the end of the year.
The announcement therefore wasn’t as severe as expected since the market was expecting that a 25% tariff will be imposed from the get-go, so the Greenback began to encounter sellers again as risk sentiment improved.
The Greenback then had a mixed reaction to China’s retaliatory tariffs, but sellers were winning since China only slapped 5-10% in tariffs on around $60 billion worth of U.S. goods, contrary to expectations for a tit-for-tat response.
And more Greenback sellers would emerge when Trump gave a speech since Trump likely helped to ease trade-related jitters when he said the following (emphasis mine):
“So we’ll see what happens. But we’re making a lot of headway with China. China wants to come over and talk, and we are always open to talking.”
Even more USD bears were enticed to attack when Chinese Premier Li Keqiang saidthat (emphasis mine):
“One-way devaluation will do more harm than good to China’s economy. China will by no means stimulate exports by devaluing the yuan.”
After that, easing trade-related concerns on hopes that the U.S. and China will settle their differences became the dominant narrative, sending global equities higher, supporting the higher-yielding currencies, while also sapping demand for the Greenback.
The same theme then continued to play out on Thursday since there were no fresh negative catalysts for the Greenback, but the Greenback just kept on sliding (except on USD/JPY).
The Greenback would finally get a chance to lick its wounds on Friday. There were no apparent catalysts, but market analysts were attributing the Greenback’s recovery to short-covering.
The damage was already done, though, so the Greenback is turning in another poor performance this week.
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