November 27, 2024

China cuts tariffs to boost confidence

LQDFX Forex news Blog– China cuts tariffs to boost confidence

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In efforts to boost confidence amid the economic impact of the virus outbreak China cuts tariffs as part of the Phase 1 trade deal.

China’s finance ministry announced that from 0501 GMT on Feb. 14, additional tariffs levied on some goods will be cut in half.  The announcement reciprocates the U.S. commitment under the deal but also attempts to boost investor sentiment. The ministry did not state the value of the goods affected by the decision.

This move comes days after Chinese policymakers prepared measures to support China’s economy jolted by the coronavirus outbreak. The virus outbreak, which coincided with the Lunar New Year holidays, had stifled economic activity in the country. Chinese authorities have also pumped in billion of dollars into money markets this week in an effort to restore calm.

Further, the proposed tariff cuts point to clear progress in Sino-U.S. trade ties. After more than 18 months of back-and-forth tariffs, tough negotiations and economic damage, an initial US-China trade deal was signed in mid-January. China added it hoped to work with the United States to eliminate all tariff increases in future.

The financial markets received well the news at a time when Beijing seeks to shore up investor and business confidence. On top of that, this move could help improve negotiating conditions for a second phase of a trade agreement.

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Forex – China cuts tariffs to boost confidence

Unexpected China cuts tariffs fuelled demand for riskier assets. Investors bet that the global economy would avoid long-term damage from the coronavirus.

Markets were already beginning to emerge from safe-haven assets.

The U.S. dollar gained 0.1% to $1.2985 per pound. It was trading just below a two-month high against the euro at $1.0996.

The Japanese yen, considered a safe haven, slipped to a two-week low against the dollar.

The euro stood flat at $1.0996.

The Australian dollar rose for a fourth straight day on Thursday. Against the dollar, the Aussie AUD=D3 advanced 0.1% to $0.6765.

Britain’s pound limped lower as concerns about Britain-EU negotiations for a post-Brexit trade deal rattled investors. After dropping to as low as $1.2957 on Wednesday, sterling recovered marginally and was down 0.1% at $1.2983 in early trade on Thursday. Sterling was unchanged against the euro at 84.68 pence.

Oil prices rose for a second day. Brent rose by 66 cents, or 1.2%, to $55.97 a barrel by 0842 GMT, having risen 2.4% in the last session. Still, it is down about 15% so far this year. U.S. West Texas Intermediate (WTI) futures gained 51 cents to $51.26.

Gold prices rose on Thursday as mounting concern over the coronavirus impact on the global economy sent investors fleeing into the safety of bullion. Spot gold gained 0.5% to $1,564.81 an ounce by 1048 GMT, having dropped on Wednesday to its lowest since Jan. 21 at $1,546.90. U.S. gold futures rose 0.4% to $1,568.60.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money