Mexico trade talks drove investors towards safe-haven currencies. Mexican and U.S. officials resume talks in Washington aimed at averting an imposition of tariffs on Mexican goods.
President Donald Trump saying “not enough” progress on ways to curb migration was made when the two sides met on Wednesday. Frustrated by the lack of progress, Trump unexpectedly told Mexico last week to take a harder line on illegal immigration. Otherwise, they are to face 5% tariffs on all its exports to the United States starting on Monday, rising to as much as 25% later in the year. Vice President Mike Pence chaired the meeting on Wednesday afternoon. Secretary of State Mike Pompeo and Mexican Foreign Minister Marcelo Ebrard made the case that Mexico needed to do more to stop a surge in Central American migrants crossing the border.
If the tariffs go ahead, the United States would be in a serious trade dispute with both China and Mexico. Being in dispute with two of its three top trading partners, is a situation that U.S. business groups are keen to avoid.
Mexico also wants to stop a trade war that analysts believe might tip its economy into a recession. Mexican President has said he is optimistic that an agreement will be reached. However, his administration is preparing for a no-deal outcome, too.
U.S. President Donald Trump threatened to hit China with tariffs on “at least” another $300 billion worth of Chinese goods. However, he said he thought both China and Mexico wanted to make deals in their trade disputes with the United States.
START TRADINGForex – Mexico trade talks hurt risk sentiment
Foreign exchange markets were also subdued because traders were awaiting the ECB’s monetary policy meeting later in the day.
The dollar index stooped to a two-month low of 96.749 midweek. benchmark U.S. yields declined sharply this week to 21-month lows on investor risk aversion. Heightened prospects of the Federal Reserve cutting interest rates weighed too.
Japan’s yen approached a five-month high on Thursday after a lack of progress in U.S.-Mexico trade talks. The Japanese yen has been the main beneficiary from a shift towards assets investors deem safer. It rose as much as 0.3% to 108.07 yen per dollar, close to its strongest level since Jan. 10.
The euro jumped 0.5% on Thursday after the ECB refrained from hinting at an interest rate cut, merely pushing back the timing of its first post-crisis rate hike. The single currency was 0.5% higher at $1.1273 after brushing a 1-1/2-month high of $1.1307 earlier this week.
Sterling remained firmly within recent ranges on Thursday. The pound was little changed at $1.2692 on Thursday, having risen from a five-month low of $1.2560 hit on Friday after the dollar weakened. Sterling slipped 0.1% to 88.545 pence per euro, near five-month lows.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money