US-China trade war makes currencies hardly budge

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A report from Reuters revealed that on Wednesday, the major currencies hardly budged, as traders are looking forward to the final outcome of the trade war between the United States and China, as well as the short holiday week in the US.

The same source mentions that a United States Dollar was traded at 109.05 yen, while the two-week high was reached this Tuesday, amid the optimism regarding a possible deal between Washington and Beijing, able to finally stop the trade spat lasting for the past 16 months.

As for the euro, it managed to maintain at $1.1023, as there weren’t any important changes this week, while the trading is slowing down, just ahead of Thanksgiving. However, we’re expecting some major players to wind down a big most of their trade for 2019.

Everything to end in December?

On Thursday, President Donald Trump revealed that Washington is currently in the “final throes” of completing a deal that would end the trade war. He also talked about the support for all the protesters in Hong Kong, otherwise a potential sore point with China.

Trump’s comments somehow managed to maintain the bullish mood in the United States stock market, as the major currencies remained on hold as well, while market participants avoid making big bets before an official announcement regarding the trade deal will be made.

“Judging from Trump’s comments, an agreement will have to wait at least until the weekend,” revealed Kyosuke Suzuki, Societe Generale Tokyo’s director of forex. 

It’s no secret that rollbacking tariffs has been one of the biggest sticking points the President has imposed, while Beijing kept demanding to be scrapped as part of the deal. Nevertheless, the United States still imposed special tariffs on Chinese goods, on the premise of trade practices the government considers unfair. While China, on the other side, responded in a similar manner.

“I think markets are betting that a likely compromise will be to continue to negotiate on tariffs. If that turns out to be the case, we could see a buy-on-rumor-sell-on-fact type of selling in the dollar/yen,” Suzuki added.

Still difficult to predict the end of the trade war

However, right now it’s more than obvious that if the US and China won’t be able to reach an agreement as soon as possible, we should expect even more tariffs on Chinese goods, starting with December 15.

“The market is believing that the December tariffs won’t be activated,” claims Minori Uchida, MUFG Bank’s chief currency analyst. 

Finally, a report released this Tuesday revealed a serious and unexpected drop in new home sales in October, while the data for September was revised higher, showing purchases hitting the highest level in the last 12 years. And now, everybody is looking forward to December, in order to see if the ‘trade war’ will finally come to an end.

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