U.S. Dollar Weakens as China Trade Tensions Feed

 

The U.S. dollar falls to its lowest level since July.. The dollar’s weakness can be attributed to the trade tensions with China fading. In response to the improving mood around trade, the euro gained 0.1% against the dollar while the Dollar Index fell to 96.8. In equity markets, U.S. S&P 500 futures are currently up 0.1%, while the Shanghai Composite Index rose 1.2%, and Hong Kong’s Hang Seng inched up 0.30% to start the week. Markets have also been calmed by the lack of subscription to the Fed’s overnight repo operations, assuaging concerns around a repeat of September’s liquidity crunch in overnight markets.

 

 

Long term rates rise, pushing yield curve to steepest level since 2018. The spread between 2-year and 10-year yields widened out to 31.8 basis points, the steepest level since 2018 and a sharp contrast to the inversion seen earlier this year. The last minute sell-off in Treasurys has somewhat tempered what remains the strongest year since 2011- the Bloomberg Barclays Index rising nearly 7% on the year. The 10-year yield currently sits 6 basis points higher on the day at 1.93%.

 

 

Day ahead. The monthly Chicago PMI report will be released at 9:45, which will reflect current business conditions in the Chicago area. The last three reports have shown lower-than-expected numbers, and it is predicted that December will follow the same trend. The National Association of Realtors will release the pending home sales at 10:00. The number is a leading indicator of housing activity including existing home sales. The index was steadily rising in 2019 until it fell sharply in October. The market predicts that November’s numbers will show an increase of 1.1%