The dollar retreated on Thursday, thanks to Trump’s tweets against Europe and China over accusations of “big currency manipulation.”
Trump took to twitter his accusations that they have been pumping money into their economies. He added that the United States ought to match such efforts, unless Uncle Sam wants to “continue being the dummies who sit back and politely watch as other countries continue to play their games.”
The US dollar index, a key gauge of the buck’s strength against six other major currencies, lost 0.1%, trading at 96.317.
Overnight, the ADP payrolls data showed that the private sector only added 102,000 jobs in June. That was lower than the expected 140,000 jobs.
The markets’ trading volume is seen to be light on the day as the US financial markets close for a public holiday.
Traders will now focus on the upcoming US non-farm payrolls data, which will come on Friday. Economists are expecting the figure to have risen 160,000 in June, which is much higher than the 75,000 figure recorded in May.
As for other pairs, the EURUSD pair recovered 0.1% at 1.1283. The common currency has suffered much pressure since IMF Manager Director Christine Lagarde was picked to be the next European Central Bank president.
The AUDUSD pair gained 0.1% and traded at 0.7033, while the USDCNY pair declined 0.1% and traded at 6.8704. The USDJPY pair didn’t move much, trading at 107.77.
A Rate Cut is Coming
The weaker-than-expected data served as a support for the case of a Federal Reserve interest rate cut.
Other data are also appearing to back up an easing monetary policy. Factory orders for May were 0.7% lower, while the ISM non-manufacturing index slid to 55.1 in June.
Government bonds, meanwhile, are in the middle of a global rally. This has pushed US Treasury yields to the lowest in more than 2 and a half years.
European yields also tumbled to record lows, with increasing expectations that key central banks will slash interest rates to boost global economy.
The dollar is also dragged down by fading expectations of a quick resolution to the US-China trade spat.
Given the fallout from the tariffs that the US and China have imposed on each other, plus the huge expectations that a rate cut is coming, positive payroll data will not probably support the dollar.
“When US yields are this low, you can’t expect people to pile and buy the dollar. Sentiment is tilted toward testing the dollar’s downside. There are expectations for lower rates in Europe and Britain, so it may be easier for the dollar to move versus the yen,” said a senior forex strategist.
The US dollar has lost 3.5% against the yen during the past three months, with more and more people believing the Fed will cut rates at its meeting on July 30 and 31.
Benchmark 10-year US yields reached 1.939%, which was its lowest since November 2016 before perking up slightly.
Lower yields are usually not good for the dollar’s appeal, and fewer people hold it.