US Dollar Slumps As Trump, Navarro Clarify US-China Trade Deal ‘Fully Intact’

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The US dollar is slumping against most of its G10 currency counterparts on Tuesday. The greenback failed to extend its gains as investors poured into equities after the release of several important economic reports. The buck continues to trade downward amid renewing confidence in global financial markets, particularly after the White House clarified that the US-China trade deal is still proceeding as expected. But could it rebound if a second wave of the coronavirus strikes major economies?

The IHS Markit’s June flash reading of the manufacturing purchasing managers’ index (PMI) was still in contraction territory, but it rebounded to 49.6. The services PMI rose to 46.7, while the composite PMI surged to 46.8. Anything below 50 indicates a contraction. These were the best readings in three months, driven by businesses reopening, consumer spending, and output and new orders sliding at the slowest pace since April. Business confidence continues to improve.

The Federal Reserve Bank of Richmond’s manufacturing index improved from -27 to 0 this month.

According to the US Census Bureau, new home sales spiked 16.6% in May to 676,000, up from the 5.2% drop in April. This comes one day after the National Association of Realtors reported a 9.7% decline in existing home sales in May, up from the 17.8% plunge in the previous month.

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On Monday night, White House trade advisor Peter Navarro suggested that the US-China trade agreement was “over.” The comments sent financial markets crashing, forcing the administration official to clarify that his remarks were “taken out of context” and that the trade pact still stands. President Donald Trump also intervened, tweeting that the phase one deal is “fully intact.”

Equities continued their modest gains on Tuesday as the leading stock indexes are up about 1%. The Nasdaq Composite Index also hit an all-time high when it topped 10,150. The higher stock market prompted investors to flee safe-haven assets and buy stocks, which impacted the greenback.

The US Dollar Index, which measures the greenback against a basket of currencies, tumbled 0.46% to 96.59, from an opening of 96.93. The index is still below its peak of 103 from earlier this year. The buck has wiped out most of its huge gains due to greater investor confidence in the stabilized markets.

The USD/CAD currency pair slipped 0.04% to 1.3517, from an opening of 1.3523, at 16:52 GMT on Tuesday. The EUR/USD increased 0.52% to 1.1321, from an opening of 1.1261.

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