US - China Trade War Rhetoric Weighing Further on the Chinese Yuan (CNH)
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US Dollar and Chinese Yuan Talking Points:
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A commonly asked question, answered here – What is the Difference Between CNH and CNY?
US – China Trade Relations Remain Fraught
Media sources reported yesterday that US President Donald Trump is likely to place tariffs on all remaining Chinese imports as early as December if the latest round of trade talks fail. The reports - all based on a Bloomberg article - say that the US will place tariffs on the remaining $257 billion of Chinese imports not already subject to tariffs if there are no new developments in the ongoing trade spat. President Trump indicated in mid-September that he would ramp up tariffs if talks fail.
The US dollar pushed higher against the offshore Chinese Yuan and neared the 7.00 level for the first time in nearly two years. This ‘psychological’ level has proved difficult to cross over the recent months, despite the rate weakening sharply over the last few months. USDCNH has weakened ever since trade wars started earlier this year, with the weaker CNH negating some of the effects of US-imposed tariffs.
We have produced A Brief History of Trade Wars infographic to help with trade war timelines and effects.
USDCNH Weekly Price Chart October 30, 2018
US Dollar Gets the Safe-Haven Bid Again, not Gold
The US dollar remains firm despite of trade war escalations, aided primarily by a supportive monetary policy backdrop and higher US rates. The US Dollar basket (DXY) remains within touching distance of making a new 16-month high with only next week’s mid-term elections likely to temper its rise. On the flip-side, gold is underperforming and is $20 lower than its recent high print made last Friday, October 26. Gold currently trades at $1,223/oz. and may slip further towards 61.8% Fibonacci support at $1,215.4/oz.
Gold Daily Price Chart October 30, 2018
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--- Written by Nick Cawley, Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.