Daily Morning Report 04.06.2018

The dollar opened the week sliding on Monday morning, but holding on to most of its strength even as confidence in the U.S. economy was boosted by a strong jobs report and the likelihood of another interest rate increase by the U.S. Federal Reserve increased.

In China, the People’s Bank of China set the reference rate for the yuan against the dollar, the mid-point from which the currency is allowed to trade, at 6.4208 versus the previous day’s 6.4078.

Investors continue to watch closely the looming trade war between the U.S. and China. Talks between the U.S. and China ended on Sunday without any deal announcement and China threatening to void any previous commitments.

A trade war could prompt China to slowly devalue its currency.

In a widely distributed statement, China said that “if the U.S. introduces trade sanctions including raising tariffs, all the economic and trade achievements negotiated by the two parties will be void.”

Last Friday evening, U.S. released job data. Nonfarm payroll employment increased by 223,000 in May, while average hourly earnings also rose 0.3% compared to May last year. The unemployment rate fell from 3.9% to 3.8%. The strong data supported the idea that the Fed may raise rates later this month.

The Australian dollar was higher after the country reported upbeat economic data that sent the Aussie higher even as investors continued to look for cues from U.S.-China trade relations.

The AUDUSD pair gained 0.42% to trade at 0.7600, breaking the 0.7550 level. On Monday, Australian Retail Sales came in at 0.4%, beating the forecast 0.2%. Company Gross Operating Profits for the first quarter also came in bullish, printing at 5.9% versus the forecast 3.0% and the previous 2.2%.

Elsewhere, the USDJPY pair gained 0.06% to 109.60. The upbeat U.S. data supported the dollar against the yen.