As the threat of a second wave of coronavirus infections rattled investors, markets also weigh trade tensions between the United States and China.
New infections that were recorded in countries which have eased restrictions, dented earlier investor optimism. The scenario that economies could get back to close to normal soon seems to be confirmed.
On the trade war front, Trump administration blocked semiconductor shipments to China’s Huawei Technologies. This move ratcheted up fears of trade hostilities between Washington and Beijing. In response, the Global Times editor-in-chief said China would activate the “unreliable entity list”, restrict or investigate U.S. companies. Further Beijing may suspend the purchase of Boeing Co airplanes.
This comes a day after President Donald Trump signaled a further deterioration of his relationship with China over the coronavirus outbreak. The US President went so far as to suggest he could even cut ties with the world’s second largest economy.
A renewed Sino-U.S. trade war could exacerbate the economic downturn caused by the pandemic.
In another sign of economic duress, the U.S. Commerce Department’s report showed retail sales in April sank more than expected. This marked a second straight month of record declines as the coronavirus kept shoppers at home.
START TRADINGForex – Markets weigh USA – China relations
As hopes faded for a quick global recovery from the pandemic, traders unloaded the trade-sensitive Aussie and moved into safer assets such as the dollar.
The US dollar was up 0.1% against a basket of currencies at 100.43. But the greenback set for a 0.6% gain for the week on rising Sino-U.S. tensions.
The Canadian dollar was trading 0.2% lower at 1.4081 to the greenback. The Canadian dollar added to this week’s decline against its U.S. counterpart as markets weigh USA – China relations.
The yen was up 0.2% at 106.99 per dollar. But the Japanese currency has been grinding lower this week as U.S. Fed officials talked down the prospect of negative rates, also buoying the dollar.
The Australian dollar and the New Zealand dollar both fell 0.6%, to 0.6428 and 0.5956 respectively. The Aussie dollar was on course for a 1.4% decline since Monday.
The euro was last neutral versus the dollar at $1.0799. The common currency held its ground after German economic output contracted by 2.2% in the first quarter.
Also,the British pound remained under pressure, falling 0.6% to $1.2155, its lowest since March 27. The European Union’s Brexit negotiator Michel Barnier said that the third round of talks with Britain on a new partnership was “disappointing”.
Sterling is in its fifth consecutive day of losses and is the worst-performing G10 currency so far this month. It has fallen more than 2.2% against the dollar since the end of April.
The pound was down 0.2% versus the U.S. dollar at $1.2209, not far from the five-week low of $1.2166 it reached the previous day. It was also falling versus the euro, last by 0.3% to 88.59 pence.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money