Safe havens soar as US-China trade talks come to a head

  • All posts
    All posts|Currency Updates
    All posts|Currency Updates|International Trade
    All posts|In The News
    All posts|International Trade
    Charities & NGOs
    Currency Updates
    Currency Updates|In The News
    In The News
    In The News|Press
    International Trade
  • Latest

9 May 2019


Currency traders continued to pile into the safe haven Japanese Yen this morning, which rose to a three-month high on growing concerns over the US-China trade conflict.

alks between the two economic superpowers over trade have taken a rather dramatic and unexpected turn for the worse in the past few days, with sources suggesting that China had taken a new hard line stance over discussions on hopes of US concessions. This has angered President Trump, who has vowed to impose fresh tariffs at midnight on Friday. Two days of talk will commence in Washington today in the hopes that a deal can be salvaged.

As we mentioned yesterday, while there is a chance Trump’s tariff threats are a negotiating tactic the severity of the threats, which would see existing tariffs on $200bn worth of Chinese goods increase from 10% to 25%, has caused the market to fret. Should these tariffs be enacted tomorrow we would likely see a more pronounced exacerbation of the rather violent moves we have seen in the past few days, namely a sell-off in almost every emerging market currency and sharp rallies in the saf-havens.
The Japanese Yen, the chief beneficiary of safe haven flows, is currently trading at a three month high. Higher risk currencies such as the Australian and New Zealand Dollars have been battered. Those Asian countries who rely heavily on demand from China have also fallen to multi-month lows in many cases, namely the Malaysian Ringgit, South Korean Won and Indonesian Rupiah to name a few.

BoE member Saunders talks down rate hike chances
Sterling continued to remain fragile this morning amid the flight from risk and pessimism over Brexit, falling back below the 1.30 level.
Bank of England MPC member Saunders spoke this morning, stating that interest rates in the UK would go higher over time, but not by much and at a slow pace. While such comments from BoE members would usually go under the radar, it is worth noting that Saunders has historically been one of the most hawkish members of the committee, so his admission that pours cold water over the prospect of rate hikes is significant.
With no major economic data out of the UK today, attention turns firmly to tomorrow morning’s first quarter GDP numbers. The UK economy is expected to post flat growth quarter-on-quarter that, if confirmed, could pressure the Pound even lower on Friday.