Talking Points:
- The rapid depreciation by the Chinese Yuan in recent weeks had some market participants wondering if the currency was being used as a tool in the slow boiling China-US trade war.
- A compromise between the CDU and CSU has eased pressure from the Merkel government in Germany, giving the Euro[1] some breathing room to recover.
- Sentiment for the US Dollar[2] remains mixed as prices consolidate.
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The US Dollar (via the DXY[4] Index) is trading in a typical pre-holiday fashion, carving out a small range as rates of market participation stay low. The appearance of a second consecutive inside day bar suggests that traders are refusing to commit to a direction in the greenback in the first half of the week - a week cleaved in twain by the US July 4 holiday.
As is often the case when inside bars materialize, particularly in a consecutive fashion, traders appear to be in a holding pattern. Given the economic calendar this week, especially on the US data side, this is not necessarily a surprise: the releases of the US ADP Employment report and the US ISM Non-Manufacturing Composite (both Thursday) will help provide insight and shape expectations into the June US Nonfarm Payrolls report due on Friday.
Elsewhere, overnight most attention was paid to movements in the Chinese Yuan. As trade tensions between the US and China remain elevated, there was a growing belief that Chinese policymakers were intentionally allowing USD/CNH[5] to appreciate as a way to counteract any negative
