The onset of the trade war between the United States and China may have caused widespread damage across the world, but it has managed to strengthen the U. S. Dollar considerably. Due to the overall turmoil in the markets, investors decided to park much of their capital in safe assets like the dollar, and that necessitated the rise. The price of gold has increased as well for the same reason. However, on Wednesday, the publication of retail data proved to be another significant boost of the dollar as traders in Asia piled on to the currency. At one point, the US Dollar index rose by 0.4% and hit 96.922.
On Tuesday, the Commerce Department reported that the retail sales rose by as much as 0.4% in the month of June. Analysts had expected a small rise of 0.15. The retail sales data proved to be an excellent boost to the sentiment that the United States economy is still strong, and additionally, it managed to end all talk of looser policies from the Federal Reserve. The rise in the dollar has hence not come as a complete surprise at all. On the other hand, the Great Britain Pound continued to flounder and rose by a mere 0.1% against the dollar.
Additionally, it is currently trading at its lowest in two years as the political turmoil in the country continues to wreak havoc with the currency. The country is going to nominate a new Prime Minister at some point next week, and the specter of Brexit looms large, as Britain has still not been able to decide on an exit strategy. The possibility of a highly damaging ‘no deal’ Brexit is rising by the day, and if that happens, then the nation faces a massive economic struggle. Those sentiments seem to have been priced into the current level of the pound. The weakness in the pound is apparently having an adverse effect on the Euro as well. Currency analysts at Daiwa Securities said, “The euro has been weighed by the long-struggling pound, which in turn is likely to suffer from Brexit-related woes until the Conservative party leader is decided next week.”