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Dollar rises a second day as trade talks, retail data take center stage

Sara Sjolin


The dollar continued to rise on Tuesday, boosted by hopes a trade war between the U.S. and China can be averted and as traders looked ahead to a report on retail sales.

The pound eased as a mixed U.K. jobs report was seen as dampening expectations of an imminent Bank of England rate rise.

What are currencies doing?

The ICE U.S. Dollar Index (IFUS:DX-Y.NYB) climbed 0.1% to 92.716, rising for a second straight day.

A broader measure of the greenback, the WSJ Dollar Index (CALCULATED:BUXX) rose 0.1% to 86.50.

The euro (EURUSD) traded at $1.1921, down slightly from $1.1929 late Monday in New York.

The pound (GBPUSD) fell to $1.3543 compared with $1.3556 on Monday.

The greenback also advanced against the yen (USDJPY)(JPY) , buying ¥109.94 compared with ¥109.65 on Monday.

What is driving the market?

The dollar headed higher as trade talks between the U.S. and China continued. While analysts said there is still a long way to go, the suggestion that China is open to easing tariffs on some agricultural products in exchange for the U.S. offering a lifeline struggling Chinese telecom giant ZTE were seen as providing a glimmer of hope.

In the U.K., data showed the unemployment rate remained at a 42-year low of 4.2% in March, while wages without bonuses advanced 2.9%, up from 2.8% in February. However, earnings including bonuses slipped to 2.6% from 2.8%.

What are strategists saying?

“This reduced risk of a U.S./China trade war has helped to boost U.S. Treasury yields, with the U.S. 10 year yield back above 3.0% once more. With yield differentials a driver of forex, this is helping to pull USD/JPY higher as market sentiment improves,” said Richard Perry, market analyst at Hantec Markets, in a note.

“The fact that there is a willingness to meet in the middle ground on certain issues, helps to reduce the prospect of debilitating tit-for-tat sanctions between the [U.S. and China] that everyone loses from,” he added.

What could move the markets later?

April figures for retail sales are due to hit at 8:30 a.m. Eastern Time, with economists polled by MarketWatch forecasting a 0.3% rise. A May report on the Empire State Manufacturing Survey is expected at the same time.

At 10 a.m. Eastern, traders are slated to get a May figure for a housing-market index, as well as March data on business inventories.

On the Federal Reserve front, Dallas Fed President Robert Kaplan is due to take part in a discussion at the Council of Foreign Relations in New York at 8 a.m. Eastern Time, and San Francisco Fed President John Williams is slated to give a speech to the Economic Club of Minnesota at 1:10 p.m. Eastern.

Also Tuesday, a Senate panel is scheduled to hold a hearing on the nomination of Richard Clarida to become the Fed’s vice chairman and Michelle Bowman to become a member of the central bank’s board of governors.

Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.

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