Uncertainty is back in business

David Hobart

The renewed optimism about a range of global economic problems which surged on Monday appeared to be waning on Tuesday as markets faced up to the reality of the situation they were in.

The US dollar, which on Monday appeared to be riding high following a partial trade deal between that country and China, was holding firm – but was below the high point it had seen earlier in the week.

It was noted against the Japanese yen at 108.35 at one stage, although this was a third or so of a yen down from its strong performance as of the end of last week.

This came as traders began looking for more concrete information about where the markets look set to go next.

The deal which was struck between China and the US has largely been described as an early phase deal, suggesting that there is more to come.

According to press reports, Chinese officials are seeking a further meeting along the lines of the one which took place last week featuring top negotiators and officials from all sides.

Bloomberg reported that this would need to happen before the end of this month.

It is understood that Xi Jinping, the Chinese Premier, will refuse to sign the deal, which covers everything from currency to some intellectual property exchanges, until this second meeting has gone ahead.

Across the Atlantic, the currency markets were also being rocked by suggestions that the deal between the EU and the UK which had been much-discussed on Monday might now fail to materialise following suggestions that time could be running out.

The British pound, which was riding high at the end of last week, was now well under its high point from the end of last week.

It was managing to hold largely firm compared to the US dollar, and it was seen at $1.2604 at one stage.

There are still believed to be some sticking points, including what would happen on the border of Ireland.

However, EU officials were indicating as late as Tuesday morning that a deal could still potentially be fleshed out – even though it would be hard to achieve.

The deal will most likely need to be ready to go by the time the European Council meets for its summit on Thursday.

If no deal can be struck, it remains unclear how the country will proceed.

Prime Minister Boris Johnson continues to claim that the country will leave without a deal on 31st October– although this is now against the law in the country.

A special sitting of the UK Parliament is expected to take place this Saturday.

The Turkish lira was also in the spotlight over the course of Monday after it was revealed that Turkey will lead a military effort in a part of Syria.

US President Donald Trump added sanctions to the country as a result of the move, which comes amid continued fighting in the region.

However, the Turkish lira did not appear to be profoundly moved by the decision on Tuesday, and it remained at 5.9239 lira to the US dollar.

This followed a decline of four-fifths of a percentage point on Monday.

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David Hobart
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