Emerging Market Woes and Trade Tensions Drive the dollar Higher


The dollar index which measures the greenback against a basket of major currencies rose to a ten-day high of 95.40 ahead of the European trading session. DXY bounced-off a one-month low of 94.47 on Thursday as trade tensions hit investor’s risk appetite. Trump offended Canada and threatened to terminate NAFTA on Saturday as the United States and Canada failed to reach a trade deal last week. The USDCAD rose to a two-week high of 1.3116 earlier today. Trump administration is set to impose more tariffs on $200 billion worth of Chinese goods which can take the trade war to a new level. On the other hand, the greenback is gaining strength from the weakness of the emerging markets currencies such as the Turkish Lira, Argentina Pesos, and South African Rand. The USDTRY traded at a high of 6.66, and the USDZAR climbed to a two-week high of 14.99.


The Australian dollar is weaker on the day against the US dollar as the RBA kept rates unchanged at 1.50%. The AUDUSD rose to a high of $0.7234 post the release of the statement, but the Aussie erased gains. The Bank declared that the low rates are providing support to the economy as household consumption and wage growth remain low. Market participants will shift their focus to the second quarter GDP figure where the numbers are expected to show that the economy grew at a slower pace.


Gold prices tumbled to a ten-day low earlier during the Asian session as the dollar strengthened. The gold ounce traded at a low of $1194 during the Asian session. On the other hand, silver prices were weaker as the price of a silver ounce fell to $14.31, the lowest since February 2016.


Oil prices remain strong, supported by the US sanctions on Iran and the supply disruption. Market participants expect the sanctions to decrease the Iranian oil exports to very low levels leading to tighter market supply. On the other hand, two oil rigs were evacuated in Mexico ahead of an expected hurricane. The West Texas Intermediate crude futures traded at a six-week high of $70.44 per barrel, and the Brent futures rose to a high of $78.33 per barrel.

Major Economic Events

GMT Country Event Expectation Previous
8:30 UK Construction PMI (Aug) 54.9 55.8
9:30 AU RBA Governor Lowe Speaks    
12:15 UK Inflation Report Hearings    
14:00 US ISM Manufacturing PMI (Aug) 57.6 58.1

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