WASHINGTON, D.C. – US stocks managed to close at an all-time high with the S&P 500 at 3.066.9 on Friday. It comes after the US economy showed more solid employment data and records, which shows 128,000 jobs added last month.
There was also a boost in sentiment after Robert Lighthizer, US trade representative, and Steven Mnuchin, Treasury Secretary, made a statement informing about having talks with the Vice Premier Liu He of China on the first phase of the US-China trade agreement.
Whether new highs will be experienced this week will significantly depend if the venue of time of the deal will be announced. But until the details of the agreement are finalized, data gathered from both the US and China shows the damage in the economies that were caused by the trade war between the two countries. The US will provide its trade numbers for September Tuesday this week, while China will announce the trade balance for October later on Friday. The numbers both countries will announce will most likely determine who gets the upper hand as they continue with the next phase of the trade deal.
On the other hand, the US dollar fell to a three-month low against different currencies from the latest rally, despite the big job data. Two factors are reported that may have caused the weakness of the US dollar. One is the trade optimism in regards to the US-China reaching the first round of their negotiations, causing lesser safe-haven flows back to the Greenback. Another factor considered to cause this all-time low for the US dollar is the weak manufacturing data showing Greenback contracted for three consecutive months based on reports from the Institute of Supply Management.
If the evidence on US business confidence continues to deteriorate, the odds from the current 44% chance pricing in the market of at least a rate cut until March next year is going to surge.
On the plus side, there may be two conditions where the US dollar might gain back momentum, however extreme cases they may be. The first case would be gaining a very strong economy for the country where money will continually flow from all over the world and into the US assets. Second would be the fear and pessimism about the global recession encouraging the continuous inflow of assets into the Greenback and other safe-haven currencies. Currently, the rate is in the middle, and it’s not doing any good for the US dollar.