It was expected that the monetary policy decision of the Federal Reserve would be the major event this week. While the Fed had indeed a big impact on markets, ultimately it was overshadowed by new developments in the US-China trade conflict. The resulting risk aversion allowed the US dollar to rise against riskier commodity currencies but drove the greenback down versus safer currencies.
The Fed cut interest rates by 25 basis points, largely in line with market expectations. But markets were disappointed that US policymakers did not signal about a prolonged cycle of rate cuts, sending the dollar up.
Yet traders soon turned their attention towards a surprise escalation of Sino-US trade war as US President Donald Trump announced new tariffs on Chinese goods. As to be expected, China responded with a tough stance, saying that it is ready to retaliate in a similar manner.
The next week will light in term of macroeconomic releases in the United States. Therefore, traders will watch further developments in the China-US conflict.
EUR/USD opened at 1.1125, fell to the weekly low of 1.1027, but rebounded to close at 1.1105. USD/CHF dropped from 0.9924 to 0.9823. AUD/USD declined from 0.6905 to 0.6796.
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- August 3, 2019
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