Forex Today: Dollar recovers lost ground to a high of 97.56 as trade optimism returns, lifting markets

Forex today was a touch firmer on the bid with respect to risk appetite as markets flipped risk on, with risk assets grinding back some of the losses seen the prior day as trade spat sentiment continues to dominate the financial and commodity markets.  

US President Trump’s trade comments were optimistic and he  tweeted:  

“When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense.”

Should markets buy into promising talk such as this, in anticipation of meetings to take place in due course, then risk can continue to cover.  Trump said he’ll meet with President Xi at the Osaka G20 summit (28-29 June), and said that there is a “very good dialogue going.”   Later headlines said that Mnuchin will head to Bejing to continue talks soon.  Trump also renewed his criticism of the Fed and claimed that GDP would grow at 5% with “a little quantitative easing.” This also pumped up the stock markets,  risk-FX and enabled yields and teh dollar to recover some lost ground.  The US 10yr treasury yield rose from 2.40% to 2.43%. The 2yr yield climbed  from 2.18% to 2.21%. The DXY moved from the 97.20s to a high of 97.56.

Currency action (Analysts at Westpac summarised)

• EUR/USD fell from 1.1240 to 1.1205.  
• GBP/USD was unable to gain on the low UK unemployment data, losing 0.5c over the day to 1.2910.  
• USD/JPY ranged between 109.45 and 109.75, consolidating its Tokyo session gains.
• AUD/USD was unable to rally on the better risk mood, trading flat on the day around 0.6945.  
• NZD/USD had reached 0.6590 in Sydney trade, then fading to 0.6575.
•  AUD/NZD dipped to 1.0546 before rebounding to 1.0565.

Key notes from U.S. session:

Wall Street bounces on Trump striking a more upbeat tone on US-China trade negotiation

Key events ahead:  

Australian consumer sentiment and    Australia’s key wages measure come ahead of China’s    industrial production, retail sales and fixed asset investment.