US dollar grind extends, and the outlook isn’t bright

The dollar remains under pressure on Monday. USD is mixed against major currencies this morning, but the outlook points to further downside for the greenback.

Investors turned negative on the dollar last week for the first time in more than a year. Speculative positions on the US dollar fell by another $2 billion last week, data from the Commodity Futures Trading Commission showed on Friday.

Political uncertainty continues to hover over the greenback, and a weaker USD may be the path of least resistance in the near term. The Russia probe continues to be a concern for investors who are eager to see progress on legislation in Washington. Senior White House advisor and President Trump’s son-in-law Jared Kushner testified before the Senate Intelligence Committee today. Kushner said he left the highly controversial meeting between Donald Trump Jr. and a Kremlin connected lawyer early, denying any involvement in the purported collusion between the Trump campaign and Russia.

As the President struggles to implement his economic agenda and data remains soft, the USD may struggle to find some upside.

Euro pauses

Euro is headed for its first decline in days after PMIs disappointed.

Stepping off a two-year high against the USD Monday, traders paused as Purchasing Managers’ Index survey fell to a six-month low in July.

The ECB decision pushed forward guidance on tapering its asset purchase program to autumn last week, and four sources said policymakers saw October as the most likely date to decide on this late Friday.

Loonie keeps climbing

Canadian dollar higher Monday morning on firmer oil prices and a pickup in economic data.

Wholesale trade sales – an important indicator of the health of the Canadian economy – rose more than expected in May. The monthly survey covers sales and inventory levels across the country and a variety of industries. Increased sales of motor vehicles and agricultural supplies led a 0.9 percent monthly gain versus the 0.5 percent increase expected. A downward revision in the prior month has seen a negative revision of 0.2 percent to 0.8 percent is slightly offsetting, but CAD doesn’t seem to mind.

Higher oil prices could keep CAD underpinned. Saudi Arabia’s oil minister has committed to limiting crude oil exports to 6.6 million barrels per day next month, almost a million less than a year prior.

UK talks trade

Trade talks between the US and the UK kick off in Washington this morning.

UK International Trade Secretary Liam Fox will spend two days in Washington to hold preliminary talks with his US counterpart, Robert Lighthizer. Mr. Fox reportedly favors more relaxed rules that would give the two countered a free-trade deal, but publically has said that it is too early to say exactly what would be covered in a potential deal.

Trump has been a vocal proponent of deal with the UK, having said that it would be beneficial for both countries and “we will have that done very very quickly”. But trade experts are skeptical.

Britain cannot officially conduct trade negotiations until March 2019 – their official break with the European Union. Trade deals are also extremely complex and often take years to iron out. While the trajectory of these specific talks remain unclear, optimism for an immediate solution will be tempered with the reality of circumstances.

EURUSD: Euro lower after PMIs disappointed, with composite PMI for the euro area falling to a six-month low.

GBPUSD: The pound is higher against the greenback as UK Trade Secretary Liam Fox begins a two-day talk with his counterpart in Washington.

AUDUSD: Aussie dollar is the strongest currency this morning, up 0.45% against the USD as commodity currencies remain supported.

USDCAD: Canadian dollar higher with firmer oil prices and better than expected wholesale trade sales.

USDJPY: Yen higher against the greenback ahead of the Bank of Japan’s monetary policy meeting minutes due overnight.