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The dollar fell on hopes that the US and PRC will agree

The dollar fell on hopes that the US and PRC will agree.

The US dollar fell under "distribution" on Wednesday on a wave of several reasons, which became the reason for profit taking after the resumption of the rally.

It all started with the morning news that a new American delegation of negotiators will come to Beijing on Wednesday to resume discussions on the topic of the new US tax duties against China. This raised hopes that Washington would still be able to reach an agreement with Beijing. After Tuesday, it was announced in the States that the news of the publication on June 15 of the list of goods, as well as technology, which will be introduced with duties of 25% and a total volume of 50 billion dollars. On Wednesday, relief came.

In the world markets, this news was perceived as positive and became the reason for the growth in demand for risky assets. This led to an increase in the yield of US government bonds, a certain easing of the yen, and sell-offs of the US dollar. The yield of the benchmark of 10-year-old Treasuries in the moment grew more than 3.6% for the day, having risen from the opening level of 2.763% to 2.857%. On this wave of the weakening of the dollar, crude oil prices have sharply increased, which remained under pressure for the last few days due to expectations for an increase in crude oil production by Russia and Saudi Arabia and the strengthening of the US dollar.

The disclosure of weaker data on the number of new jobs from ADP and the second revision of US GDP for the first quarter downward from 2.3% to 2.2% also became the basis for the beginning of fixing the wound to the dollar profit.

The question arises, is there really a real opportunity to agree to the two countries with the largest economies in the world?

In our opinion, it's too early to be happy, as they say. The first round of talks, judging by the reaction of D. Trump, the US president, was unsatisfactory for him. The second one will be known either today or tomorrow. Assessing the president's desire to get more than he really can will cause the failure of the talks or he will have to significantly reduce his appetites, which the US establishment may already not like. Because of this we now have expectations to solve the old trade deficit problems by force. In this case, we should expect the beginning of a full-scale trade war with all the ensuing disadvantages. And what they can be, we have already observed on Tuesday.

Forecast of the day:

The EURUSD pair remains in the short-term downtrend. If there is no positive news from the meeting of the Chinese with the Americans, we can expect the pair to turn down towards 1.1515.

The GBPUSD pair is trading below the 1.3300 level. The pair may also turn down for the same reasons as the eurodollar and fall again to 1.3200.