Sterling has made gains against the US dollar during yesterday’s trading with USD traders remaining cautious ahead of US-China trade talks moving to Washington.
There are hopes that a trade consensus can be reached ahead of the 1st March deadline. The consequences of an agreement not being reached could be huge and far reaching with the Trump administration threatening an increase in tariffs on China to 25%, up from 10%. If China were to retaliate this could hurt the global economy as the two super powers slug it out.
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It could be the case that Chinese President, XI Jinping will seek to make as few concessions as possible by keeping the US happy in an attempt to outlast Trump’s Presidency. This is a very risky game considering the Trump’s threat of an increase to 25% on Chinese goods. Keep an eye on developments, as if talks do not go well we could see US dollar weakness as we near the 1st March deadline.
There is also mounting tensions between Congress and the White House. President Trump is threatening to use the first veto of his presidential reign if politicians refuse to adhere to his border wall criteria. Despite sterling’s current fragility I may be tempted to hang fire with a US dollar purchase in the hope these issues will present an opportunity.
The Federal Open Market Committee (FOMC) meets on numerous occasions throughout the year to address monetary policy. It looks at price stability and sustainable economic growth. It is keenly watch by investors to see if there is any hint to a change in monetary policy that could alter the value of the US dollar.
It will also be worth keeping an eye on Manufacturing & Services PMI on Thursday, although there is set to be little change from the previous months data if they do land away from expectations expect volatility
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