The lack of aggressive rhetoric on the part of the United States or North Korea over the weekend calmed the market participants and they seem to have removed part of their “bearish” bets against the dollar on Monday. According to data on US futures last week, traders have accumulated the largest short exposure to the dollar since 2013.
On the first day of the week there were sales in the assets havens and the return of traders to stock purchases. Despite disappointing Friday data on consumer price inflation, the dollar rose against a basket of currencies on Monday. Commentary by the influential member of the Fed, William Dudley, led gains. The banker expressed confidence in another interest rate increase by the end of the year if economic data were to meet expectations.
Disappointing data on China’s economy showed unexpected cooling of the second largest economy in the world. On Monday, factory production data disappointed the markets, showing weaker annual growth than expected.
Investments also show signs of weakness along with the real estate market, where stagnation in price increases has been observed. The Chinese economy seeks to rely increasingly on domestic consumption at the expense of cheap exports, so the reported decline in retail sales growth on an annual basis may hint for longer cooling.
The dollar index, measuring green money against a basket of 6 major currencies, recorded a confident start of the week, rising by 0.39% on Monday. Last week we watched the eight-week bottom of the USD / JPY pair, but on Monday it recorded a 0.45% rise to JPY 109.64 per dollar.
The Swiss franc is the other currency that won most of the last week’s secure asset purchases. The franc rose by more than a percent from the dollar since the beginning of the “war of words” between the United States and North Korea, but since the beginning of the week, we have seen sales in the Swiss currency, which lost most of the money earned on green money.
The rising dollar and weak data from China brought a volatile oil session, which eventually ended with a fall in price of more than 2%. WTI’s light crude oil futures ended trading Monday with a 2.5 percent drop, reaching a 3-week low at $47.59 a barrel.
The global benchmark, Brent, was down $1.36 or 2.6% to $50.74 a barrel. A sharp decline in prices was seen as soon as the Chinese data revealed a significant decline in Chinese refineries, which raises concerns about the future demand for oil from the second-largest economy.