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US Dollar May Rise if US Data Amplifies Trade War, Recession Fears

US Dollar May Rise if US Data Amplifies Trade War, Recession Fears

Dimitri Zabelin, Analyst

US Dollar, US-China Trade War – TALKING POINTS

  • US Dollar may rise vs Euro if US-China trade war fears spill over into European hours
  • European stock markets may be in turmoil while bonds and CHF may emerge as victors
  • Risk aversion may be amplified if US durable goods order fall short of median estimates

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APAC Recap

The Japanese Yen surged when APAC’s Monday session opened. S&P 500 futures and crude oil prices – along with Asian equity indices – gapped lower alongside the cycle-sensitive AUD and NZD. Trade war fears over the weekend placed a premium on anti-risk assets and soured sentiment as the rift between Beijing and Washington continued to widen.

US Durable Goods Order Data May Magnify Risk Aversion

The US Dollar may rise against the Euro if US durable goods order data falls short of the 1.2 percent estimate, which is already lower than the previous print at 1.9 percent. If the report underwhelms, it could amplify the risk-off tilt markets are experiencing against the backdrop of deteriorating US-China trade relations. The demand for liquidity will likely outweigh the downward pressure of an uptick in Fed rate cut bets.

Looking at a US Dollar index shows that despite market expectations of an increase in the central bank adopting accommodative monetary policy, the Greenback has continued to rise. Fundamental headwinds from geopolitical uncertainty to fierce trade wars are boosting the US Dollar as traders shift from chasing yields to preserving capital.

CHART OF THE DAY: A Rough Start to the Week

Chart Showing USDNY

USDCNH chart created using TradingView

FX TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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