Forex- Dollar Recovers from U.S.-China Trade Feud Risk Aversion

The dollar took some steps back towards normalcy during morning trade in Asia Thursday, recovering its poise from the risk-aversion caused by elevated trade tensions between the U.S. and China earlier this week.

The US Dollar Index that monitors the value of the greenback relative to a basket of six currencies stood at 94.92, up by 0.15% at 11:50PM ET (3:50GMT).

Long-term Treasury yields recovered from three-week lows on Wednesday, supporting the dollar’s rise on Thursday.

Federal Reserve Chairman Jerome Powell said on Wednesday that the U.S. central bank should continue with a gradual pace of rate increases, which also supported yields. Powell said during a meeting of central bank chiefs in Portugal that trade tensions could cause damage to the global economy.

“Changes in trade policy could cause us to have to question the outlook,” Powell said during the conference in Sintra, Portugal. “For the first time, we’re hearing about decisions to postpone investment, postpone hiring.”

Dollar hovers near 11-month peak, shaky pound awaits Bank of England decision

The dollar hovered near an 11-month high against a basket of currencies on Thursday, supported by a rise in U.S. yields, while the pound was at its lowest level since November 2017 ahead of a Bank of England monetary policy decision.

The dollar index (DXY) against a group of six major currencies stood at 95.243 after rising to 95.299 overnight, its highest since mid-July 2017.

Buoying the greenback, long-term Treasury yields bounced back from three-week lows, as risk aversion felt earlier in the week amid United States-China trade tensions eased for now.

GBP/USD Price Forecast – GBP/USD Slides Downwards Ahead of BOE Rate Decision

The GBP/USD is continuing to sink on bearish action into the week’s swing lows. The BOE’s rate call today is guaranteed to be a non-starter, but traders will be keeping an eye out for hints about action in the 3rd quarter. The GBP/USD is continuing to slump in Wednesday’s lows near 1.3140 as the US Dollar gets supported by rebounded US Treasury yields. Thursday’s big event is the Bank of England’s (BOE) rate call, due at 11:00 GMT, and the central bank is widely expected to remain on hold on rates. The BOE was knocked off their hawkish stance recently as a slump in economic figures for the UK’s economy that was expected in the first quarter threatens to slip into the second half of the year.
Market hopes for a rate hike to come in the third quarter have begun to evaporate lately.

Pound Awaits BOE

Some analysts believe the MPC would keep policy on hold and shy away from comments about market expectations of future rate hikes. However any comments from BOE members about 2018 Q1 macro data that suggests the soft data to be temporary would be interpreted as a signal for rate hike in August 2018. Currently the GBPUSD pair has hit new 2018 lows and is trading near the range of Mid-November 2017



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