The US Dollar was lifted to an 11 months high level last week. The escalating US dollar trade war worries is the major reason for the volatility in the US dollar currency pairs. The market sentiment seams to take a further growth in the USD as less likely. Therefore we believe the dollar will retreat back to previous levels in the week to come.
The EU leaders are meeting for a summit in the week to come. Thus we can expect announcements of counter-measures to Donald Trumps growing trade taxation regime. At the same time China has announced its response to the US trade barriers to be effective upon blue chip corporates.
Will the US Dollar Trade War Test the Forex Trends?
As the US Dollar trade war continues to escalate we may see an upward momentum in the Forex market. However, the Forex market sentiment is exploring a potential change in the trend. Thus we are likely to believe the USD trend will stagnate and change against its major currency counterparts.
The Bank of England kept its interest rate unchanged last week with a hawkish outlook for the future. With the EU summit ahead we expect the GBP to remain bullish as the summit will bring the focus back to Brexit.
OPEC has agreed to increase the production output by 1 million bpd. Provided that the market feared an even higher production output from OPEC the prices for brent spot futures has rose above 75 USD per bbl. The 1 million bpd increase is likely to represent an approximate increase of 650k bpd in reality. Thus the latest announcement from OPEC has already been priced into the market.