The US dollar weakened against its major currency counterparts yesterday afternoon as two days of discussions between the US and China began, in order for the two nations to reach an agreement regarding tariffs on $200 billion of Chinese goods.
|Currency Pair||% Change (Month)||Difference on £200,000|
Threats of an all-out trade war escalated further yesterday after Donald Trump said he was taking steps to impose tariffs on a further $325 billion of Chinese goods which hadn’t been considered until now.
Discussions between the world’s 2 largest economies had been seemingly going well, and a deal had been close to being agreed on, until Wednesday when a draft agreement had been sent by China to the US, however China had amended the agreement and removed its fundamental commitments which had been previously agreed by both sides, in each one of the 7 chapters.
China had denied backtracking on the agreement however and appealed to the US, asking for a halfway meet in order to salvage the agreement. Commerce Ministry spokesperson Gao Feng said yesterday ‘we hope the US can meet China halfway, take care of each other’s concerns, and resolve existing problems through cooperation and consultations.' A drawn out trade war between the two countries would not only put severe pressure on the global economy, but would cause disruption to supply chains, and create mass concern amongst investors already nervous of the impacts of such an economic global slowdown.
Volatility on US dollar exchange rates could continue throughout today as events unfold. If the US agree to give China more time before imposing tariffs this could be beneficial for US dollar exchange rates, as investors moved funds away from the USD due to the uncertainty involved in discussions throughout yesterday and today, however if the US go ahead with implementing tariffs on China this could see the US dollar weaken further. Keep up to date with the latest developments by contacting your Account Manager here who can be your eyes and ears in such a fast moving market.
This afternoon at 1.30pm, Consumer Price Index data, also referred to as inflation, will be released for April, and is expected to rise from 0.1% to 0.2% Month on Month, and from 2% to 2.1% Year on Year. However if these figures disappoint we could see further US dollar weakness tomorrow afternoon.
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