Even though both the US and China are optimistic of a possible deal, Trump’s tweet left the market confused. It would be safer to stay on the sidelines.

  • Chinese Vice Premier Liu He flew to Washington DC to resume trade talks with US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer.
  • US President Trump concluded the talks by saying, “We had a very, very good negotiation with China.”
  • Given Trump’s reputation, it may be too early to conclude there is progress on the trade talk.
  • Day 1 of the trade talk caused risk-off currencies to strengthen after a false rumour from China Morning Post saying that the Chinese ministerial delegation would only stay for one day. This was denied by the White House and reaffirmed by Fox News.
  • This was offset by reports from Head of International Affairs for the US Chamber of Commerce Myron Brilliant who said that there could be a currency agreement this week.
  • Myron Brilliant also said that both sides agreed to low-level “early harvest” agreements such as currency and copyright protections while bigger deals such as market access and intellectual property remain on the table.
  • Trump tweet left the market confused as he said: “Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House.” 
  • It is unknown how much progress the trade talk actually made but a limited deal from the negotiations this week will be beneficial to Trump given his impeachment probe.
  • We believe that a smart move from Trump would be to settle for limited deals on low-level issues so as to buy some positive press for himself.
  • EUR/USD may be a good pair to short even if a limited deal is made. The upside for EUR/USD could be limited due to the major slowdown in eurozone economy, especially Germany. This pair could fall towards 1.0940.

Breaking News: US-China Trade Talk – Deal or No Deal?

 

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Fullerton Markets Research Team

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