Investing.com – The u.s. dollar rose on Monday against a basket of currencies, while all signs pointed to tensions, global trade subsided, but the gains were held back by expectations of lower u.s. interest rates.
Against a basket of six major peers, the dollar rose 0.3% to 96,871 at 12: 00, recovering slightly after a loss of 1.2% last week, its worst performance week since the week of February 16, 2018.
The market sentiment was reinforced after the United States and Mexico have concluded an agreement on migration at the end of last week to avoid a war tariff. The us president, Donald Trump had threatened to impose customs duties on the import of 5% on all mexican products as of Monday, if Mexico agreed not to further tighten its borders.
During the past year, trade disputes between the United States and its trading partners, including a long-standing conflict with China, have already slowed global growth and disrupted financial markets.
The chinese exports have resumed unexpectedly growth in may despite the rise in u.s. rates, according to data published on Monday, but many feel that this increase was due to shipments in the upstream businesses to avoid the increases in u.s. rates. Fears of a trade war longer between the United States and China, have persisted.
The financial managers of the Group of 20 said on Sunday that the trade tensions and geopolitical had “intensified”, which might be detrimental to the improvement of global growth, without, however, claim a resolution of the trade dispute that is intensifying between China and the United States.
Against the yen, the refuge, the dollar gained 0.43% at 108,64 yen. The yen rose at the end of the month of may because of the deterioration in the outlook of world trade, the currency has a tendency to take advantage of geopolitical tensions or financial, with Japan being the first creditor country to the world.
Bart Wakabayashi, director of the branch office of Tokyo at State Street Bank, said that the agreement on the us-mexico “would be passed probably on the optimistic with China and that progress would be made”.
“We had trade negotiations with the EU, with Japan. I hope that they will begin to turn towards a positive narrative which should lead to a new weakness of the dollar in yen”, he said.
Nevertheless, the gains of the dollar have been curbed by expectations that the Fed will reduce interest rates in the second half.
These views have been bolstered Friday when the data showed that the u.s. economy created 75,000 jobs less than expected in may, suggesting that the loss of dynamism of economic activity spreading on the labour market.
Futures contracts on the federal funds rate always report more than two rate cuts of 25 basis points by the end of this year, even after their withdrawal on Monday after the agreement between the United States and Mexico.
“The market says that it is not a question of whether, but rather when and to what extent we will get a rate reduction for this year,” said Weston of Pepperstone.
The euro has dropped 0.2% to 1,1309, down from a peak of 11 weeks 1,1348 reached Friday.
–Reuters contributed to this report