As the negotiations between the United States and China drag on without results, investors are becoming increasingly suspicious of the prospect of the two sides signing a trade agreement anytime soon. Both Donald Trump and Xi Jinping are busy men, and their schedules are usually known many weeks in advance. Investors had hopes for a meeting before December 15, so that China can avoid a new round of tariffs on its goods, but as there is no news on that front, this deadline seems unlikely to be met.
The currencies most affected by this are safety assets. The Japanese yen has been strengthening against the US dollar for days, especially after China stated yesterday that a deal right now might be out of the question.
The American dollar has been hit hard by the news that the trade dispute might not end soon. Over the last few months, the US economy began showing signs of wear and tear, prompting the Federal Reserve to cut interest rates for the first time in a decade. However, the central bank was optimistic that the trade war is winding down and may end soon.
Now that that’s not the case, the USD is slipping again on the prospect of slowing growth in the United States. The dollar index dropped to 97.80, allowing the JPY, the EUR, and the GBP to win back some of their lost ground.
The pound is additionally supported by the high likelihood of Boris Johnson’s Conservative Party winning the upcoming general election in the United Kingdom.
