China warned yesterday that the US is ‘opening fire’ on the rest of the world, including itself, with Donald Trump’s 25% trade tariff threats, and the dispute has quickly gathered more and more momentum. The US Dollar report below looks into the possible escelation of trade wars between the US and China and the potential for impact against the USD. The table below shows the difference in return you could have achieved when selling £200,000.00 to Dollars during the high and low trading points of the past month.

Currency Pair% ChangeDifference on £200,000
GBP/USD3.1%$8,040
Midterms offering a slight opportunity to buy dollars?

Trump’s tariffs on $34 billion’s worth of Chinese imports began in the early hours of this morning in the UK, which was just after midday in Beijing, and Donald Trump has now threatened to increase these tariffs to cover as much as $450 billion of Chinese goods if China was to retaliate.

China has stood by their promise not to be the first to implement any changes, but that they would retaliate like for like to every tariff implemented by the US, which is exactly what has happened this morning – the moment the US tariffs came into play, so did the Chinese tariffs. There have been warnings that these tariffs from the US will damage supply chains on an international level including global trade of commodities from companies all over the world, including the US.

The US Dollar weakened against the Euro, which is key with USD/EUR being the most traded currency pair globally, and a basket of other major currencies, after a mixed bag of data was released from the US yesterday. Initial and Continuing Jobless Claims rose showing that more US citizens filed for unemployment benefits last week, however this was counterbalanced by better than expected Non-Manufacturing PMI (Purchasing Managers Index) released by ISM, measuring activity in the Services sector.

Would a global trade war scupper the FED’s plans to raise US Interest Rates?

Fears are that an all out trade war could soon be on the cards if the largest global economies continue to impose like for like tariffs, and this would almost certainly damage economic growth for every country caught up in its web. Although the US Dollar hasn’t shown too much weakness from this so far, as a safe haven and higher yielding currency, this could prevent the Federal Reserve from raising Interest Rates further which would be detrimental to the US Dollar.

US Non-Farm Payrolls are released on the first Friday of each month, and this data release is usually a significant US Dollar mover. Expectation is for a fall in new jobs created which could weaken the USD further to end the week. This is followed by Average Earnings which are expected to improve slightly, so clients with USD exposure could benefit from getting in touch ahead of these releases.

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.