Beijing has taken a tough response to trade tariffs imposed on $50bn of Chinese goods. However The Chinese could be calling President Trump’s bluff by deciding to match tariffs Dollar for Dollar. It could be the case they are not trying to escalate the trade war, but actually put an end to it. The Dollar report below discusses this factor and how it could impact the Dollar as trade tariffs continue. The table below shows the difference in USD you could have achieved when buying £200,000.00 depending on the exchange rate, during the high and low points during trading yesterday.
|Currency Pair||% Change||Difference on £200,000|
It is a risky move considering Trump has promised further tariffs if there was Chinese retaliation. US officials are currently working on $100bn more of potential tariffs should Trump decide to make good on his promise.
The US’s total exports to China last year were impressive at $130bn. A like for like retaliation would have to cover all US exports.
Any tariff escalations beyond this could hit the Chinese economy hard.
It looks as though the US are holding all the cards at present.
You would expect the tariffs to hit the US economy and in turn the Dollar, but the USD is proving to be the destination of choice for investors.
10yr Treasury Bonds are currently at a four year high and the US interest rate outlook is impressive.
With the current lack of clarity surrounding Brexit and the poor run of economic data there is little justification for the Pound to make any significant gains against the US Dollar.
Today we will witness the release of services and also manufacturing Purchase Manager Index (PMI) figures. Manufacturing is considered to be the more important release as it makes up a considerable amount of US GDP. There is expected to be a slight rise from 56.4 to 56.5, but I think a larger increase is possible which could benefit the US Dollar.
This could be countered by the Services data however, as there is expected to be a fall from 56.8 to 56.4 (figures above 50 indicate growth).
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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