Buck Stays Bid as US China Tensions Ease

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Market Drivers May 21, 2018
USDJPY sees a mild bid on Mnuchin comments
NZD Retail Sales miss
Nikkei 0.31% Dax – closed
Oil $71/bbl
Gold $1284/oz.
Bitcoin $8500

Europe and Asia:
NZD Retail Sales 0.1 vs. 1.0%

North America:
No Data

With a large swath of Europe and parts of North America on bank holiday today, the start of weekly trade in FX was exceedingly slow as the eco calendar was barren while geopolitical news sparse.

The only factor of note were upbeat comments by Treasury Secretary Mnuchin who stated that the US-China trade was “on hold” for now.

Mnuchin and U.S. President Donald Trump’s top economic adviser, Larry Kudlow, said the agreement reached by Chinese and American negotiators on Saturday set up a framework for addressing trade imbalances in the future.

“We are putting the trade war on hold. Right now, we have agreed to put the tariffs on hold while we try to execute the framework,” Mnuchin said in a television interview on “Fox News Sunday.”

The news put a mild bid into USDJPY which recaptured the 111.00 figure in Asian session trade and climbed to 111.38 by mid-morning London dealing. The pair continues to perform well, boosted by optimism over US growth and the fact that 10Y benchmark yield continues to hold above the psychologically key 3.00% level.

Elsewhere, in New Zealand the retail sales numbers missed their mark by a wide berth coming in at 0.1% versus 1.0% forecast, confirming suspicions that the overall economy has slowed in Q1. The pair dipped below the .6900 figure in response and remained offered all night long, but for now, the .6800 support appears solid and would only give way if RBNZ continues to hint of a possible rate cut.

With no data scheduled for release in North America, trading conditions will be thin and likely rangebound unless the market is hit with some unexpected news. The dollar is grossly overbought and due for at least a mild profit taking correction but for now, the bears have no viable catalyst to spur a counter-trend move.

Boris Schlossberg
Managing Director

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