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U.S.-China Uncertainty Adds Pressure To Dollar

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In European session, the risk tone seems risk-off with EMEA indices mostly negative as ongoing tensions between the U.S. and China weigh on the overall tone.

Others than expectations for a potential more downbeat tone from the FOMC at this week’s meeting, U.S.-China uncertainty is keep pressuring on USD, as DXY fall below 94.00.

Discussing USD’s weakness as a result of US/China tensions, Commerzbank stated: “In the past the dollar was able to benefit from the U.S.-Chinese trade conflict. That is no longer the case now. What is at stake is no longer just trade. The US might be overstepping the mark with its policy towards China, just as with its measures against some European countries. If the dominance of the dollar in international trade and capital markets was to be reduced as a result, the USD weakness we are seeing at the moment would only be a very watered-down taste of things to come.”

EUR is gaining some benefits from a weak USD, and JPY is also outperforming as it emerges as the preferred safe-haven under current circumstances.

In the sessions ahead, the analysts expect ongoing USD weakness to continue benefitting its major counterparts, especially JPY is the risk tone continues to sour.

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