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Why a Trade War is Helping the U.S. Dollar

  • Kathy Lien
  • 18 June 2018

The U.S. dollar is on a tear as it reaches for 6 to 12-month highs against other the major currencies. 

While the Federal Reserve and European Central Bank’s monetary policy announcements were the biggest events of the week, the U.S.’ trade war with the rest of world is having a greater impact on currencies. Although many people feared that a trade war would exacerbate the dollar’s troubles and reduce demand for the greenback, it instead sent the dollar soaring as investors interpret Trump’s aggressive trade actions as short-term trouble for countries he’s singling out. The U.S. tariffs on China reversed the dollar’s post-FOMC slide and sent euro tumbling 2.5 cents in one day. The euro and Australian dollars were last week’s worst performing currencies. Traders should expect things to worsen as the U.S. now risks retaliation from China after having officially slapped tariffs on hundreds of products. The European Union also endorsed a plan for tariffs on U.S. products that will be implemented in late June, early July. The European Commission meets on Wednesday, June 20th and they could very well back “counter-balancing measures.” All of this means that currencies will be particularly sensitive to headline risk this week. 

5 Day Reurn vs. USD June 11-15

 

 

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About the Author
Kathy Lien
Kathy Lien is Managing Director and Founding Partner of BKForex. Having graduated New York University’s Stern School of Business at the age of 18, Ms. Kathy Lien has more than 13 years of experience in the financial markets with a specific focus on currencies

Ms. Kathy Lien is Managing Director of FX Strategy for BK Asset Management and Co-Founder of BKForex.com. Her career started at JPMorgan Chase where she worked on the interbank FX trading desk making markets in foreign exchange and later in the cross markets proprietary trading group where she traded FX spot, options, interest rate derivatives, bonds, equities, and futures.

In 2003, Kathy joined FXCM and started DailyFX.com, a leading online foreign exchange research portal. As Chief Strategist, she managed a team of analysts dedicated to providing research and commentary on the foreign exchange market.

In 2008, Kathy joined Global Futures & Forex Ltd as Director of Currency Research where she provided research and analysis to clients and managed a global foreign exchange analysis team. As an expert on G20 currencies, Kathy is often quoted in the Wall Street Journal, Reuters, Bloomberg, Marketwatch, Associated Press, AAP, UK Telegraph, Sydney Morning Herald and other leading news publications.

She also appears regularly on CNBC’s US, Asia and Europe and on Sky Business. Kathy is an internationally published author of the bestselling book Day Trading and Swing Trading the Currency Market as well as The Little Book of Currency Trading and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game all published through Wiley. Kathy’s extensive experience in developing trading strategies using cross markets analysis and her edge in predicting economic surprises serve key components of BK’s analytic techniques.


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