Forex – Dollar Strengthens as U.S./China Tensions Rise

imageForex22 hours ago (May 04, 2020 03:03AM ET)

(C) Reuters.

By Peter Nurse

Investing.com – The U.S. dollar has seen some buying in early European trade Monday, with the escalating war of words between U.S. and China over the origin of the coronavirus causing a flight to safety.

At 3:00 AM ET (0700 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 99.377, up 0.3%, while EUR/USD fell 0.4% to 1.0938. GBP/USD dropped 0.3% to 1.2462 and USD/JPY fell 0.1% to 106.81.

The latest move from U.S. officials to pin the blame on China for the outbreak of the Covid-19 pandemic came from Secretary of State Mike Pompeo Sunday, who stated there was “a significant amount of evidence” that the virus emerged from a laboratory in the central Chinese city of Wuhan, without providing any details.

This followed on from President Donald Trump’s threats Friday of fresh trade-war hostilities between the world’s two biggest economies, as Washington continued to pile the pressure on Beijing.

This comes as the evidence of the economic damage caused by the outbreak mounts – China has reported its first quarterly GDP contraction since such records began, while some 30 million Americans have filed claims for unemployment in the last six weeks.

“Trump’s weapon of choice (to win over the workers again) could be China-bashing in combination with renewed isolationism,” said analysts at Nordea, in a research note.

“The corona virus may have offered Trump a chance to ‘reveal’ that the trade deal is 100% off, and to take a renewed China aggressive stance into the election instead,” Nordea added.

The comments are at odds with the administration’s actual actions in recent weeks. It has temporarily suspended levying import tariffs on a range of Chinese products since the pandemic erupted in an effort to avoid raising prices for hard-pressed U.S. consumers.

Worries that this spat may turn into another trade war, just a few months after the first round of the trade deal between the two powers was signed ending the last damaging conflict, are hitting risk appetite.

The price of crude has also turned lower as a consequence, hitting the petrocurrencies, and the Norwegian krone in particular.

At 3:00 AM ET, U.S. crude futures traded 5.7% lower at $18.66 a barrel, while the international benchmark Brent contract fell 1% to $26.18.

The big event of the week for Norway’s currency is Thursday’s Norges Bank meeting, but ahead of this the primary drivers of the krone remain “global prospects for the reopening of the economy, physical oil demand recovery, global asset prices and continued NOK buying by Norges Bank on behalf of the Ministry of Finance,” said analysts at Danske Bank, in a research note.

The krone weakened on Friday in the absence of Norges Bank’s purchases–there was a holiday in Norway–and that has continued Monday.

At 3:00 AM ET, USD/NOK traded 1.9% higher at 10.40 and EUR/NOK gained 1.5% to 11.36.

Forex – Dollar Strengthens as U.S./China Tensions Rise

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Leave a Reply

Your email address will not be published. Required fields are marked *

Join The Exclusive Underground Investor Premium Member Status! Your Trade Ideas Are On The Next Page...


 
 


 

By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected. Remember that you can opt-out any time, we hate spam too!