Dollar Strengthens This Morning, European Markets Decline

The dollar strengthened on international markets on Thursday following positive assessments of the state of the U.S. economy from the Federal Reserve’s meeting, amid ongoing trade tensions between Washington and Beijing.

The dollar index, which shows the value of the U.S. dollar against six other major world currencies, strengthened by 0.3 percent this morning to 94.863 points, remaining above the lowest levels in 3.5 weeks of 94.084 points, which it slipped to at one point last week.

In the same percentage, the price of the euro against the dollar fell to 1.1626 dollars, marking its lowest level in the past week. The dollar, on the other hand, weakened slightly by 0.1 percent against the yen, to 111.66 yen.

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At the two-day meeting, the Fed kept interest rates at existing levels as expected, informing market participants that the growth of the U.S. economy is strengthening and that the labor market continues to improve.

The focus of the market is the potential escalation of trade tensions between the U.S. and China, after U.S. government officials stated on Wednesday that President Donald Trump proposes a 25 percent tariff on imports of goods from China worth 200 billion dollars, causing turmoil in financial markets and a drop in stock prices.

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Concerns over the U.S.-China trade conflict have subjected the Chinese and Australian currencies to greater selling pressures as both are sensitive to a potential deepening of the trade conflict between the two economic powers. The price of the yuan slipped by 0.2 percent against the dollar in foreign markets, while the Australian dollar weakened by 0.4 percent against its U.S. counterpart.

The British pound also faced selling pressure ahead of the Bank of England (BoE) meeting, where an increase in interest rates is expected for the second time since the financial crisis of 2008. The pound traded at 1.3078 dollars, indicating a 0.3 percent decline from the previous close.

European Stocks Decline Due to Weak Business Results

On European exchanges, stock prices fell on Thursday morning as investors were disappointed by weaker-than-expected business results from several companies, including German industrial giants Siemens and BMW.

The STOXX 600 index of leading European stocks was down 0.5 percent around 9:45 AM, marking its second consecutive day of decline.

The London FTSE index fell by 0.5 percent to 7,611 points, while the Frankfurt DAX slipped by 1.1 percent to 12,593 points, and the Paris CAC by 0.50 percent to 5,471 points.

The German DAX index saw the largest drop this morning as investors were disappointed by the business results of Siemens and BMW, with Siemens shares plummeting by 3.5 percent and BMW’s by 2.6 percent.

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Due to weaker-than-expected business results in the past quarter, the share price of fashion company Hugo Boss also sharply fell by nearly 6 percent.

The negative sentiment in the markets is also a result of increasing trade tensions between the U.S. and China, after Washington indicated plans to impose 25 percent tariffs, rather than the previously threatened 10 percent, on imports of Chinese products worth 200 billion dollars.

Beijing called this extortion and stated that it is ready to respond with countermeasures.

Since early May, China and the U.S. have held several rounds of negotiations in which the U.S. is trying to reduce its trade deficit with China of 375 billion dollars, but without results.

Asian stock prices also fell this morning, with the MSCI Asia-Pacific index down 1.5 percent around 9:45 AM, primarily due to a sharp decline in stock prices on Chinese markets.

On the Tokyo Stock Exchange, the Nikkei index slipped by 1.1 percent to 22,512 points.