The American president showed the markets again who is the boss in the house. His tweet on Tuesday night unfolded his mood in the global financial markets. His dissatisfaction with the process of negotiations between the states and the PRC, as well as the postponement of the meeting with the leader of North Korea, made investors fear that the negotiation process will be interrupted and a full-scale trade war will begin with all the ensuing problems for the world economy.
Against this backdrop, global stock markets traded on negative territory on Wednesday and the US dollar was under pressure since the beginning of the American trading session. Market participants saw the growing tension between Washington and Beijing as real and negatively affecting the dollar rate.
Moreover, there was another unpleasant moment for him, which was the increase in demand for defensive assets. Investors stepped up in the US state dollar market, buying government Treasury bonds which led to a decline in yield. So, the profitability of the benchmark of 10-year Treasuries fell by 1.56% to 3.017%. The dynamics of the government security yields has become one of the reasons for the pressure on the dollar. But, interestingly, gold remained in the negative territory. It seems that investors have not shown any interest to him yet.
On Wednesday, the commodity currencies were also under pressure but not really strong, as the decline in the dollar compensated for their weakness led by the publication of data from the US Department of Energy, showing a strong increase in oil reserves over the past week by 5.778 million barrels, gasoline by 1.883 million barrels and only stocks of distillates decreased by 0.951 million barrels. Against this backdrop, quotes of "black gold" went down along with the exchange rates of commodity currencies.
In addition to these events, the focus of the markets was on the publication of the minutes from the Fed's monetary policy meeting on May. Investors wondered if the regulator would continue to two more rate hikes in June and in September, and perhaps another increase by the end of this year. The minutes confirmed the continuation of this trend which continues to support the dollar exchange rate in the market.
Forecast of the day:
The GBP/USD pair remains in the short-term downtrend. After a small recovery to 1.3400, it can turn down and head to 1.3225.
The USDJPY pair continues to decline on the wave of growing geopolitical tensions in the World. The price is above the level of 109.45 and overcoming this level will lead to the continuation of its fall to 108.85.
* The presented market analysis is informative and does not constitute a guide to the transaction.
