March 28, 2024

US-China consulate spat catch traders off-guard

LQDFX Forex news Blog | US-China consulate spat catch traders off-guard

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The US-China consulate incident escalates tension between the two economic giants and opens another chapter in the US-China saga.

China’s foreign ministry said the United States had told China on July 21 to close its consulate in Houston, in Texas. A spokesman for China’s foreign ministry said that the order by the United States was a move that China strongly condemns. He added that China would retaliate if the U.S. did not change course.

U.S.-China relations have become more fraught since the outbreak of COVID-19. The headlines over US-China consulate spat sparked fears it could halt the U.S.-China trade deal.

However, the currency market’s reaction was short-lived. The dominant mood remained optimistic, following the EU’s agreement on a 750 billion-euro recovery fund.

The United States reported more than 1,000 deaths from COVID-19 on Tuesday. U.S. President Donald Trump said that the coronavirus pandemic will get worse before it gets better. President Trump, in a shift in rhetoric and tone, encouraged Americans to wear masks if they cannot maintain social distance.

The Republicans and Democrats struggle to reach a consensus on the next round of economic stimulus measures. After a full day of negotiations, the White House and Senate Republicans are no closer to an agreement on the next stimulus bill. There’s less than three weeks to reach an agreement before the August recess, and before current unemployment enhancements run out.

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Forex – US-China consulate spat catch traders off-guard

Currency traders regained their risk appetite on Wednesday, shrugging off U.S.-China tensions. Markets resuming the risk-on moves that have dominated since EU leaders agreed on a fiscal stimulus plan on Tuesday.

After gaining on the headlines over the US-China consulate spat, the dollar index resumed falling and was down 0.1% at 95.028.

The Australian dollar was up 0.3% at $0.71530 and the New Zealand dollar was up 0.4% at $0.6665.

The euro – which has rallied since the EU recovery fund deal announced – continued to gain. The common currency reached a new high of $1.1584, its strongest since October 2018.

Meanwhile, sterling fell versus the dollar and euro, as no-deal Brexit reports emerge. Worries around the Brexit transition period ending without any deal between Britain and the EU weigh.

Sterling was trading down 0.6% versus the dollar at $1.2653 on Wednesday. The British currency was 0.5% lower at 91.04 pence versus the euro.

Commodity markets were mixed. Oil prices fell on Wednesday as industry data showed a bigger than expected inventory build in the United States.

Brent crude fell 60 cents, or 1.4%, to $43.72 a barrel by 0912 GMT. U.S. WTI crude dropped 70 cents, or 1.7%, to $41.22.

Gold pared some gains from a rally to a near nine-year peak on Wednesday as the dollar regained ground. Meanwhile, silver scaled a near seven-year high, bolstered by hopes of a rebound in industrial activity.

Spot gold rose 0.6% to $1,853.39 per ounce by 0940 GMT, after hitting its highest since September 2011 at $1,865.35.

Silver climbed 2.2% to $21.79 per ounce, having hit its highest since October 2013 at $22.82.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money