The USD remains on the back foot, having been on the decline looking at the DXY for going on six sessions now. During the noted period, a drop of some 2.45% has been observed, trading at the lowest levels seen since mid-March.
There is not one particular catalyst, however a couple of points to note:
Firstly, the U.S. and Chinese tensions are not as bad as they could be at present. Trump only made the move in cutting Hong Kong ties, not the Phase one deal with China.
Elsewhere, earlier in the week, there were some reports citing Chinese government officials, suggesting that Chinese firms should hold-off purchasing U.S. goods. However, in Chinese press overnight it was covered that State-owned firms bought at least three cargoes of U.S. soybeans on Monday, despite sources in China saying the government had told them to halt purchases after the U.S. made their move to eliminate special treatment for Hong Kong to punish China.
Lastly, the ongoing civil unrest in the US and US President Trump’s alarming response (threatening deployment of the army, a move that most think would likely exacerbate tensions) is increasingly weighing on USD.
What does this mean for the markets?
USD weakness being seen also weighed upon by the general risk-appetite in terms of tone. Riskier FX continues to outperform the greenback, with further gains still likely over the coming weeks, unless something drastic occurs between the U.S. and China.
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