China’s deputy trade negotiator, Wang Shouwen spoke last week and has made it known about troubles in US negotiations asking “How can you negotiate with someone when he puts a knife in your neck?” The USD report below discusses how increased trade tensions between China and the US are likely to impact global trade and the US Dollar.

Currency Pair% Change in 1 monthDifference on £200,000
GBPUSD0.25%$640

The statement was made at a press conference in Beijing, aimed at shining light on a new Government policy paper on bilateral trade frictions in which China is clearly portraying itself as the victim of bullying and US protectionism.

The paper was released following the implementation of 10% tariffs on $200bn worth of Chinese imports. The response from China was $60bn worth of tariffs (5-10%) on US goods.

Wang did leave the door open for further negotiations however, but said that it was entirely up to the US to show sincerity and respect for negotiations to progress.

China make accusations against the US

The situation does not bode well for global trade when the two largest economies in the world are involved in serious trade war, which neither seems to backing down on. Despite the US instigating the trade war the US Dollar does benefit. During times of global economic uncertainty investors seek safe haven investments and the green back is often a destination of choice.

With already impressive returns (rates were hiked last week to 2.25%) there is also set to be a further rate hike this year by the Federal Reserve, which will continue to benefit the Dollar. With Brexit still hanging over the Pound if I had to purchase Dollars in the short term I would be taking advantage of current levels.

USD could gain further strength

Federal Reserve Powell’s speech, Manufacturing & Services PMI - Tuesday 2nd October

Chairman of the Federal Reserve, Jerome Powell is due to speak tomorrow. Investors will be listening out for any hints toward an interest rate hike from the Federal Reserve. There is predicted to be a further increase this year so this could well cause movement in USD value.

We also have Manufacturing Purchase Manager Index (PMI) and Services PMI data due to be released on Tuesday. Services generally is the more significant of the two. Any figure above 50 indicates growth. Services data is expected to land at 53.6, up from 52.6 which could benefit the Dollar.

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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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.