It now seems that the US-China trade war is back on, with the Treasury Secretary Steven Mnuchin being criticised for saying it was resolved in the first place. The USD is a safe haven currency, so counter to the usual reaction to a situation such as this the Dollar is likely to benefit from this uncertainty. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low points on Tuesday of this week.
|Currency Pair||% Change||Difference on £200,000|
There was recently good news regarding the US-China trade war with China agreeing to purchase $200bn in goods and services from the US calming hostilities.
There has now been renewed tariff threats from the US on Chinese exports are complicating negotiations on energy and agricultural deals.
One of Trump’s top trade advisors, Pete Navarro said on Wednesday that the Trump administration’s decision to proceed with investment restrictions and tariffs as historic.
Navarro also criticised Treasury secretary, Steven Mnuchin, chief negotiator in China talks for declaring last month that the trade war as on hold.
It looks like the trade war will be on going as Trump attempts to reduce US trade deficit.
In normal circumstances if a situation such as this occurred it would weaken the currency in question, but due to global economic uncertainty as the world’s two largest economies do battle investors flood to safe haven currencies, namely the green back.
It is definitely the currency of choice for investors as US 10yr treasury bonds now have exceeded 35 returns for the first time in several years.
There has been a huge fall in Sterling value with GBP/USD down from nearly 1.45 to below 1.35.
I can appreciate someone’s reluctance trade if you are buying USD at present considering GBP/USD was at 1.44 only recently, but the psychological aspect of the trade may need to be disregarded as there is little justification for Sterling gains.
Today Robert Kaplan, CEO and President of the Federal Reserve Bank of Dallas is due to speak. When a key member of the FED talks traders listen in the hope the Fed member may give away a hint as to future monetary policy.
If there is an indication that a rate hike from the Fed is imminent there could be further USD strength, GBP sellers be wary of hanging on for an improvement in Sterling if you have to move short term.
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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