After more than 18 months of back-and-forth tariffs, tough negotiations and economic damage, an initial US-China trade deal is official.
But, the lights of the ceremony have now been switched off. Investors believe that the signing of the initial deal may not ease trade tensions for long, as thorny issues remain unresolved.
President Trump said the next round of negotiations, which are expected to address tougher economic issues, will start soon. However, he hailed the agreement as a win for the U.S. economy and his administration’s trade policies.
President Xi Jinping in which the Chinese leader praised the deal as a sign the two countries could resolve their differences with dialogue.
The initial trade deal aims to vastly increase Chinese purchases of U.S. manufactured products, agricultural goods, energy and services. The main issue is a pledge by China to purchase an additional $200 billion worth of U.S. goods over two years. This aims to cut a bilateral U.S. trade deficit that peaked at $420 billion in 2018.
According to US officials, the agreement would add 0.5 percentage point to U.S. gross domestic product growth in both 2020 and 2021. But some experts were sceptical that purchase targets set out in the deal are realistic.
Analysts expect that deep political rifts between Beijing and Washington are set to persist, despite the trade relations breakthrough. On top of that market enthusiasm was checked, because much of the agreement was priced in.
START TRADINGForex – Phase 1 Trade Deal is official
Major currencies mostly shrugged off the signing of the Phase 1 trade deal since most of the issues agreed upon had been expected. Further, the threat of tariffs was not eliminated
Euro/dollar, the most fluid currency pair, was last trading up 0.1% at $1.1161, after matching the one-week high of $1.1164 it reached the day before.
An index that tracks the dollar against six other major currencies fell to an eight-day low of 97.134.
The safe-haven Japanese yen was a weaker at 109.97 per dollar.
The Australian dollar held 0.3% stronger after rising to a nine-day high at $0.6928.
Sterling edged higher on Thursday, hitting its best level of the week. Investors paused the ramping-up of bets on the Bank of England cutting interest rates later this month. Weaker inflation data on Wednesday added to the currency’s woes. Traders are now preparing for December retail sales data due on Friday.
The pound rose as much as 0.2% to $1.3065, while versus the euro it stood up 0.1% at 85.44 pence.
Oil prices rose, helped by expectations of more Chinese purchases of U.S. oil and gas.
Brent was 36 cents, or 0.6%, higher at $64.36 a barrel by 0941 GMT. US crude was up by 22 cents, or 0.4%, at $58.03 a barrel.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money