Dollar Index (DXY) Weighed By Poor Data & Trade Woes

The dollar index, DXY, plunged on Monday, recording the most considerable intraday losses since the month of October. With a recent lack of trade progress between US and China negotiations, the dollar’s appeal could only depend on US economic data to gain investors’ interests. Yesterday slump in manufacturing activity and trade tensions weigh on the greenback, causing a major sell-off. 

According to the ISM, US manufacturing data slump lower to 48.1 from 48.3, also missing economists’ expectation of growing to 49.2 while signaling further contraction in the manufacturing sector and conflicting with the fact that the US economy remains resilient.  

On the trade side, new signage of Hong Kong bill by US President Donald Trump had spiraled tensions in negotiations after China threatened to retaliate following US meddling in its internal affairs. 

Recently, China announced that it would release an unreliable entity list, which poses a threat to its national security or damaging the interests of Chinese businesses. The list is most likely to include relevant US business entities.

Furthermore, US Secretary of Commerce, Wilbur Ross stated in an interview that President Trump would increase tariffs if no China deal, an act would further dampen relationships between the two countries and jeopardizing the possibility to reach a phase one trade deal. Concerns and tensions are already building up as the deadline for additional US tariffs on Chinese goods are taking into effect on December 15. 

Uncertainties towards trade sentiment caused investors to flee into safe-haven assets on Monday, with pair of USD/JPY and USD/CHF both plunging up to 60 and 90 pips in one day, while precious gold holding above its demand zone near $1,460.

Photo Credit: www.pbs.org/By — Aamer Madhani, Associated Press