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Trade Wars: USD Weakens, Havens Rise as Autos Drive Into the Spotlight

Trade Wars: USD Weakens, Havens Rise as Autos Drive Into the Spotlight

2018-05-24 11:00:00
Martin Essex, MSTA, Analyst
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USD analysis and talking points:

- The USD is weaker all round amid US plans to launch a probe into car and van imports, stoking fears about a worsening trade dispute between the US and China.

- Safe havens like the Japanese Yen and the Swiss Franc have been the main beneficiaries.

Check out the IG Client Sentiment data to help you trade profitably.

And for a longer-term outlook take a look at our Q2 forecast for USD.

US-China trade war in focus again

Concerns about a possible US-China trade war have risen again, leading to a modest flight to safety in the markets, on news of US plans to launch a probe into imports of autos. This could lead to tariffs on cars and trucks similar to those imposed on steel and aluminum in March. In response, China said it would “resolutely defend” its “own legitimate interests”.

In the markets, the news has boosted safe havens like the Japanese Yen, the Swiss Franc and gold. The US Dollar has eased, although this may have been principally a reaction to the mildly bearish minutes of the early May Federal Open Market Committee meeting released Wednesday.

US Dollar Basket Price Chart, Five-Minute Timeframe (May 23 – 24, 2018)

Latest US Dollar basket DXY price chart.

Chart by IG

USDCHF and USDJPY both lost ground, while the gold price edged higher – reflecting not just the US-China trade spat but also further uncertainty about a planned meeting between the leaders of the US and North Korea.

Meanwhile, EURUSD firmed despite persistent worries about the political situation in Italy, while GBPUSD benefited from news of a rebound in UK retail sales.

You can read more of our trade wars coverage here:

The Impact of Tariffs and Trade Wars on the US Economy and the Dollar

A War to Trade More, Not Less - What’s Behind US-China Tariffs

Why International Trade News Matters for Foreign Exchange Rates

US China Trade War & a Brief History of Trade Wars – 1900 until Present

Trade War: No Respite for EURUSD as US-China Trade Talks Resume

USD Rebound Likely After Two Days of Falls, US-China Trade War in Focus

EURUSD May Weaken Further as Trade War Fears Re-Emerge

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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