The USD has strengthened today after the US and China agreed to slash tariffs on each other’s goods by 115% for a 90-day period. This means that goods imported from China into the US will now face 30% tariffs, while US exports to China will be subject to a 10% levy.
Although only a temporary pause to allow for continued negotiations, this unwinding in tariffs was significantly larger than expected by markets (which was roughly around 50%) and it represents a major de-escalation in the trade war between the two superpowers. Consequently, both the USD and Chinese Yuan have strengthened, while traditional ‘safe haven’ currencies (e.g. Swiss Franc and Japanese Yen) have lost some shine this morning.
As a result, the GBP/USD has dropped nearly 1.5-cents today and trades around 1.5% lower than last week’s high. Similarly, the EUR/USD has declined by around 1.5-cents from opening and now trades around 2.5% below last week’s high. Meanwhile, the GBP/EUR has gained around 1.2% higher from last week’s lows and currently trades around a 5-week high.
Market participants will continue to monitor any developments over the tariff situation this week. However, a busy calendar of key economic data releases this week will also draw traders’ attention. The key data points to watch out for this week includes UK job figures (Tues), US inflation (Tues), UK and EU GDP ((Thurs), US retail sales (Thurs) and finally US consumer sentiment data (Fri).
