G10 currencies happy with Dollar weakness
The week concluded as one of the most rare in financial markets of late, where the Dollar has sold off against its G-10 counterparts. This Dollar weakness occurred just days after the Dollar Index stretched to its strongest level in over 15 months, but has nonetheless been warmly received by a large number of different currencies across the globe. Out of the G10, this has included the likes of the Swedish Krona, British Pound, Australian Dollar and New Zealand Dollar, all of which have advanced beyond 1% against the Greenback.
The individual catalyst behind the sudden weakness in the USD is not completely clear, but I would put my two cents on it being a combination between a technical correction in the Dollar, and promising indications that there might be a potential breakthrough in the prolonged trade tension between the United States and China.
The major financial headline on Friday morning was that Donald Trump had asked the cabinet to draft a possible trade deal with China, something that, if occurred, would be welcome news for financial markets across the world. This would also be seen as a major threat to the USD rally, meaning that this is the potential card to help encourage a rally in other currencies around the world.
Trump is scheduled to meet Chinese authorities in a few weeks, with the potential outlook of a breakthrough in prolonged trade tensions representing a significant opportunity for financial markets to further unwind USD positions.
Elsewhere, one of the largest moves in terms of currency pairs is the British Pound, after the GBPUSD jumped 200 pips following reports of a potential Brexit breakthrough for UK Prime Minister Theresa May. Optimism over a Brexit deal being close is hardly something we have not heard countless times in recent months, so I would prefer to believe it when I really see it.
On the technical front, 1.30 in the GBPUSD has been used as a psychological level for Pound traders for a long time. I would keep an eye on whether the GBPUSD manages to conclude above 1.30 on Friday, because this is the potential signal that Pound buyers may need to feel encouraged about a further advance in GBPUSD.