The financial markets are enjoying a spell of high risk appetite amid the positive developments in the trade negotiations between the United States and China. The two countries have stated that they have reached an agreement regarding some of their differences and plan to officially sign it early in January.
In addition, the US agreed not to slam China with more tariffs on December 15 as was scheduled, while China promised to cancel some of the existing tariffs on US goods from the beginning of 2020.
Though China and the United States likely have a long way to go before they have a complete trade agreement to put an end to the trade war, these recent events have been enough to boost high-risk currencies.
The Australian dollar reached a near 5-month peak at $0.6929; the New Zealand dollar performed similarly, touching $0.6626 against the USD. We expect this optimism to continue as long as we are getting positive signals about the trade talks.
The biggest loser amid the world’s most popular currencies right now is the British pound. Though the election results and the certainty that Brexit will finally happen on January 31 without further delays initially boosted the pound, Boris Johnson’s recent amendments to the bill have pressured the sterling.
The UK Prime Minister decided to shorten the transition period just until the end of 2020, making investors worry about whether a comprehensive trade treaty between the UK and the remaining EU member states is even achievable in that short amount of time.
