Futures slip, bank earnings ahead, Powell to speak - what’s moving markets
Investing.com -- The dollar has been weighed down by weeks of tariff noise, but this time the greenback could find support as trade tensions escalate into the November 10 deadline for a new U.S.-China, according to Macquarie.
There could be "a natural way out of the US-China impasse,” Macquarie says, via a deal where China buys more US goods, the US maintains low tariffs, and both sides remove non-tariff barriers. But with President Donald Trump under domestic constraints, China is in no rush to concede, and the back-and-forth is likely to keep markets on edge until the Nov. 10 deadline, "before a 145%/125% tariff kick in."
If signs of a deal remain unclear, keeping high tariffs likely at the end of October, the Federal Reserve may hesitate to cut rates, the anaysts warned.
“If anything, the prospect of higher tariffs may make the Fed more reluctant to cut, or more inclined to deliver another hawkish cut,” Macquarie said.
Unlike the selloff that followed prior tariff hikes, Macquarie suggests the current build-up could see the dollar strengthen, “simply on the prospect of further Fed cuts not being a sure thing.”
As markets digest a volley of measures and countermeasure -- from the U.S. and China including rare earth export limits from China, new US entities lists, port fees, and technology bans that break earlier truce arrangements --volatility is likely to continue as traders wait for signals out of upcoming US–China talks.
For the dollar, however, the lead up to the U.S-China tariff deadline, but hold a different fate for the greenback. The risk of tighter Fed policy as well as the uncertainty swirling around future US–China trade arrangements, may tip the balance in favor of dollar resilience, at least in the lead-up to the November deadline, Macquarie said.