USD Price Dip on US-China Trade Ceasefire Could be Brief

USD price, news and analysis:

• The US and Chinese Presidents have called a 90-day truce in their trade war.
• That has weakened the USD price but it could yet recover on doubts that the two countries can bridge their differences.

USD price weakness likely to be short-lived

The USD price has weakened in early European trade Monday after US President Donald Trump and Chinese President Xi Jinping agreed to halt additional tariffs and keep their trade war from escalating. That has boosted risk appetite but there are widespread concerns that a deal might not be reached within 90 days and that could help the US currency rally.

So far, EURUSD is higher, USDJPY is down and GBPUSD is up, lowering the USD index (DXY) against a basket of other currencies.

USD Index Price Chart, Daily Timeframe (September 3 – December 3, 2018)

Chart by IG

Trump also said in a tweet Sunday that China has agreed to reduce and remove tariffs on cars coming into China from the US. Currently the tariff is 40% and any deal would also be positive for risk appetite, which has already helped risk-on currencies like AUD, as well as the crude oil price and stocks.

Crude has been boosted additionally by an expected OPEC agreement to extend output cuts. However, substantial progress in the US-China trade talks seems unlikely within the 90-day period and the truce could just postpone hostilities, leaving room for risk appetite to sour again in the weeks ahead.

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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