USD on a tear higher amid ongoing trade tensions.

Key Movers

The US dollar has been on a tear since the start of the month and the last 24 hours has been no exception. The currency got a further boost from the release of much better than expected ISM Manufacturing PMI, showing the index rose to 61.3 vs. a 57.6 estimate, the highest reading since 2004. It bodes well for US employment data, due for release on Thursday and Friday, or moreover the much anticipated Non-Farm Payrolls on Friday.

Meanwhile the NAFTA story simmers away in the background and we’re bound to hear more on this as the week moves on. As bilateral talks between the US and Canada show signs of breaking down completely, there is a real concern the Trump administration will follow through and levy more tariffs on China and renege on any compromises expected by Europe or Canada.

The escalation in trade hostilities only dampens demand for risk, amplifying the attractiveness of the USD as a haven asset. Couple this with heightened concerns regarding the stability across key emerging markets and a subsequent flight of capital and ongoing macroeconomic strength fueling support for tighter monetary policy and it is hard to look past the USD as both a short and medium asset play.


The Euro edged lower through trade on Tuesday caught up in the broader emerging market sell off and push toward the safe-haven US dollar. Slipping back below 1.16 the Euro touched intraday lows at 1.1531 before finding support and closing marginally higher.


Trade concerns weighed further on the 19 nation combined unit as investors fear the Trump administration is in no mood to compromise or negotiate on Trade with the China, Canada or Europe following the breakdown of talks between the US and Canada and a suggestion the US will impose tariffs on German automakers. Attentions now turn to a raft of services data for macroeconomic guidance in the face of broader risk and geo-political flows.


Australian GDP for the June quarter printed stronger than expected overnight at 0.9% vs. 0.7%, giving the local unit a solid 30 point boost. AUD/USD gapped through the .72 figure but it couldn’t hold with the USD pushing higher against most major currencies. In fact, the aussie has fallen back below pre-GDP release levels. Adding fuel to the fire, is the skittish demand for commodity currencies and emerging markets as Trump moves ahead with his additional $200bn tariff on China.

Local AUD/USD traders now look to Australian Trade Balance, but off-shore events will likely continue to dominate.


The Canadian dollar weakened to a six-week low against its U.S. counterpart yesterday amid an uncertain outlook for Canada’s trading arrangement with the United States. The USD/CAD pair hit a 24-hour low of 1.3089 before later recovering. The greenback extended its gains against all of the majors, thanks in part to stronger than expected manufacturing activity.

On the data front today all eyes will be on the Bank of Canada's monetary policy announcement. While the Bank of Canada is expected to hold on interest rates, the bank may hold off this month due to the ongoing uncertainty of trade negotiations. The Bank of Canada raised rates at their last meeting in July.


The kiwi has been trading towards the lower end of its recent range amid the current skittish demand for commodity currencies and emerging markets. It seems that U.S and Chinese trade relations are keeping investors on edge, too. Looking ahead, RBNZ Governor Orr is due to speak this evening, which may create a bit more volatility in the NZD.