fbpx

Trade deal unlikely this year, say reports

The foreign exchange markets reacted with disappointment on Wednesday and into Thursday after it was suggested that a proposed trade deal between China and the US was unlikely to go ahead this year.

It is understood that a deal has been pushed off the agenda until 2020 – with both trade analysts and US government sources indicating that this was likely.

It is believed that the Chinese government is seeking relatively deep tariff cuts – although the absence of a deal would mean that the next round of US tariffs on imports from China, which are due to total $156bn, could come into force.

The situation has been compounded by the perceived support of the US for protestors in Hong Kong, who are objecting to the behaviour of the China-supported government.

It is believed that President Donald Trump is ready to sign on to the statute books a pair of bills which could support protestors there.

The consequences for the currencies involved were not positive.

The onshore Chinese yuan, which is more centrally controlled than its offshore counterpart, was down to its worst performance in almost a month.

It was seen at 7.0450 at one stage in its pair against the US dollar.

This was perceived to be because of worries over what would happen to the already struggling Chinese economy in the event that tariffs were not removed.

The US dollar went down in its pair against the Japanese yen.

It was noted at 108.54 at one stage, which represented a small drop compared to the previous day.

The rise of the yen was of little surprise to traders, given that the currency – which is a so-called safe haven – frequently performs well when trade barriers appear to be rising.

In its pair against the single European currency, the US dollar was barely any different at $1.1077.

Another area of focus for many traders were the minutes of several major central bank meetings, which are either already out or are due to be released.

The Federal Reserve released the minutes of its most recent meeting on Wednesday.

These revealed that the Federal Open Market Committee is not close to moving away from its current strategy when it comes to monetary policy.

The markets were preparing for news from the European Central Bank, which releases its minutes later on Thursday.

However, analysts expected that there would not be any big changes to the euro as a result of this.

The British pound also managed to do well in its pair against the US dollar.

The dollar was down somewhat in this pair and was seen at $1.2934 at one stage.

The British general election campaign continues to gather pace, with voters going to the polls on 12th December.

A debate held earlier in the week between Prime Minister Boris Johnson and opposition leader Jeremy Corbyn was widely seen to be a draw.

In it, Johnson focused heavily on Brexit – a topic of key importance to the forex markets.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.


Popular Brokers