The majority of the major currencies had a muted response to yesterday’s signing of a trade deal between China and the United States, largely because there were no new surprises. Analysts point out that the issues which were agreed upon had already been determined since mid-2019, so this signing of Phase 1 was essentially anti-climatic for FX markets. The US Vice President has said that discussions on Phase 2 have already started between Washington and Beijing. Markets are likely to remain wary of the progress in the second phase as the issues which led to the US-Sino trade war in the first place have yet to be addressed.
As of 11:21 am in London, the EUR/USD was trading higher at $1.1159, up 0.0744%; the pair has ranged from a low of $1.11443 to a peak of $1.11643. The GBP/USD was also higher at $1.3057, a gain of 0.069%, off the session peak of $1.30655, while the low was recorded at $1.30250. The USD/JPY was at 109.9680 Yen, up 0.0774%.
Trade Deal Outlook Shaky
One strategist said that he believes that the deal is likely to last for only a short while, given that the foundation it was built upon seems to be shifting. While the US has agreed to lower tariffs to 7.5% on some Chinese goods, China’s “goodwill” will be tested in return. China had to agree to purchase US farm products, as well as other goods and services, to the tune of about $200 billion. Moreover, the Chinese government would need to amend some laws in order to accommodate Washington’s demands.