- Positive vibes in the U.S. session help lift the Dollar and US stocks higher.
- All eyes look to next week’s trade talks between the US and China.
Forex today was trading in a more risk-positive environment following reports confirming that U.S. negotiators were headed to meet their Chinese counterparts next Monday. There was also news of the announcement that a White House and Congressional deal on the federal budget and debt ceiling had been secured.
Consequently, US stocks ended higher, supported by positive corporate earnings. The Dow ended up 177 points at 27,349, while the S&P 500 index added 20 points to 3,005 and the Nasdaq Composite Index put on 47 points to close at 8,251.
With a flight to stocks, the U.S. 2-year treasury yields climbed from 1.82% to 1.84%, while 10-years moved 3 basis points higher from 2.04% to 2.07%. Consequently, the U.S. Dollar index continued to inch higher and was up 0.5% on the day, outperforming all the majors as trade and debt ceiling risks receded.
“US Trade Representative Robert Lighthizer and senior U.S. officials plan to travel to China next Monday for the first high-level, face-to-face trade since talks broke down in May. US President Trump announced a bipartisan deal to suspend the debt ceiling and boost spending levels for two years, averting the risk of a payment default,”
analysts at Westpac confirmed.
Prior to the U.S. session, the focus was on UK markets and the British Pound following Boris Johnson’s selection by the Conservatives to become the new leader, thus stepping into No10 Downing Street as PM on Thursday. However, the prospects of a hard-Brexit continued to weigh on the pound.
GBP/USD: Offered on Boris Johnson’s appointment to UK PM and hard Brexit hysteria
GBP/USD traded between a range of 1.2481 and 1.2417, morphed into a tighter range as the day progressed around current levels of between 1.2430/39. The euro was under pressure from 1.1195 to 1.1146 which as a two month low for EUR/USD as investors switch concerns over to US/EU trade relations. USD/JPY climbed from 108.00 to 108.29 as investors pilled back into risk assets and the Aussie dropped from 0.7035 to 0.6996 on Dollar strength. However, following yesterday’s QE noise surrounding the RBNZ, the Kiwi was the worst performer in the G10 space and it fell from 0.6740 to 0.6703.
Key notes from Wall Street:
Wall Street turns around on Tuesday on positives all around