New Trade Tariffs $200 Billion Announced – Dollar Supported

The US dollar is likely to be in for a volatile period after US president Donald Trump announced tariffs on Chinese imports yesterday. This latest wave of tariffs which come into force on the 24th September are considerably higher than what we have seen to date and have been set at $200 billion. The President has also made clear that if China retaliates with its own tariffs then the US will impose tariffs on all Chinese imports.

What is interesting is that to date there has been no response from China which has actually seen stock markets in Asia rally strongly whilst some of the commodity currencies are also performing extremely well. How China does respond will no doubt direct the price of the dollar so it is important to follow this story closely. For the moment the markets appear to be working on the assumption that the worst may be over in this escalation between the US and China. Expect more volatility when China does respond.

For GBP USD, this week has the potential for a big market movement with the EU summit in Salzburg starting on Thursday. The Brexit negotiations which are incredibly fraught at the moment are in the final stages of reaching a deal on the withdrawal agreement. Any positive noises from the EU or UK that a deal is within sight are likely to see substantial market reaction for the pound against the dollar. When the EU’s chief negotiator Michel Barnier said last week that a deal was 6-8 weeks away there was good jump higher for those looking to buy dollars with pounds and the rates are still holding today.

Housing data from the US is released today and will be closely watched by the US Federal Reserve. With an interest rate hike expected at the October meeting any wobbles in the economy could put that hike at risk and could see the dollar come under a little pressure.

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