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By xemarketanalysis December 4, 2018 10:37 am
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    Xe Market Analysis: US Dollar Catches a Cold and Falls to a 2-week low Against its G-10 Peers

    OVERVIEW

    •  The Dollar Index traded with a negative bias for the second session in a row, down 0.6% amidst concerns over sliding Treasury yields.
    • Sterling is trading stronger as members of Parliament started a debate on a UK-EU withdrawal agreement.
    • NYMEX WTI Crude advanced by 1.80% today ahead of an OPEC meeting.

    HIGHLIGHT

    NYMEX WTI continues to advance higher for the second session in a row after touching its lowest level since October 2017. OPEC and Russia have indicated that they are willing to revisit output and rebalance the market. Investors believe they will reduce production to remove a supply glut ahead of a significant OPEC meeting in Vienna and maintain a baseline price target $50 a barrel. 

    US DOLLAR

    The US Dollar Index slid to a seven-day low as investors fret over the inversion of the two to 10-year Treasury spread. This circumstance is viewed as an early indicator of recession. There is also the lack of clarity on the so-called trade truce between China and the US which is contributing to the broad-based weakness of the Greenback. The market is looking for safety with the Japanese Yen up 0.75% and equity markets trading in negative territory. NYMEX WTI continues to advance, with a barrel of oil trading near an eight-day high ahead of key OPEC meeting.

    BRITISH POUND

    The Sterling is trading with a strong footing this morning, up 0.3% against the US dollar. IHS Markit/CIPS UK Construction Index rose to 53.4 in November, up from 53.2 in October, recording the strongest rate of business activity expansion since July. The rate of job creation was also the fastest since December 2015. However, confidence remains subdued due to Brexit-related uncertainty. The MPs have started the debate on EU Withdrawal agreement today and will continue to do so for the next five days, culminating with a meaningful vote (December 11th). GBP/USD is set to see volatile sessions as noises around Brexit make their way into the market.

     

    EURO

    The Euro is trading slightly higher fetching 1.14 US dollar as the market looks for clear direction. The pair is being driven mainly by broad-based weakness in the dollar and story of a flattening yield curve. Investors also seek clarity on the so-called trade truce between the US and China and lack of details is weighing on the dollar. There is also conciliatory talk between Italy and EC over the fiscal plan which is giving a slight boost to the common currency.

    CANADIAN DOLLAR

    The Canadian Dollar strengthened to a 10-day high amidst broad-based US-dollar weakness. The Loonie continues to move in sync with oil prices as OPEC and Canadian resources companies consider to rebalancing the oil market with supply cuts.  Meanwhile, the market is pricing in a no-change decision from the Bank of Canada tomorrow. Recent soft data, oil prices, and household debts may push the members of the Committee to adopt a pause and see approach.

    AUSTRALIAN DOLLAR

    AUD/USD is clinging to recent gains and trades near a long-term resistance zone around 0.74. The Reserve Bank of Australia left its cash-rate target at 1.5% and reiterated concerns about a slowdown in global trade and exports taking a bite in 2020. The Central believes the current policy stance is the right one in an environment of low-income growth and high household debt.

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