US Dollar Trades Cautiously in Anticipation of Trade Deal Progress
The US dollar has opened lower into a fresh trading week as markets remain unclear on how negotiations between the US and China regarding the phase one trade agreement could progress. At the time of writing, the US dollar index DXY is trading at around 97.93, sliding to its lowest levels since early November.
The mood in the markets is slightly risk-on after officials confirmed that the latest round of trade talks were constructive, but failed to offer more details on when a trade deal could be signed. Global financial markets have been focused solely on the trade war front, which has caused severe weakness in the manufacturing sector and driven high fluctuations in currencies, sending safe havens soaring at the time of heightened tensions.
According to the latest data released by the Fed, manufacturing in the US weakened further, with factory output shrinking by 0.6% during October, after the 0.5% decline seen during the previous month. This is the steepest decline seen in the sector since May 2018. Although this drove weakness in the US dollar late last week, financial markets traded with cautious optimism in anticipation of an announcement regarding the partial trade deal.
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