Collinson FX: May 22 - US likes Sino-US trade agreement

by Collinson FX 22 May 2018 05:58 PDT 23 May 2018

Oceanbridge NZL Sailing Regatta, Day 3, February 5, 2018, Murrays Bay SC © Richard Gladwell

Collinson FX: May 22 - China news triggers surge

US equity markets greeted the news surrounding a Sino-US trade agreement, with glee, as share prices surged! Both parties have agreed to suspend threatened tariffs over the massive trade imbalance. China has agreed to enormous increases in Agriculture and Energy products and aim to cut the deficit by $370 Billion. The Dollar continued to prosper, with the GBP falling to 1.3410, while the Yen broke back above 111.00.

The US Government immediately pivoted, to address the Iran Nuclear Deal, warning Iran and reimposing tariffs. This is right out of the 'North Korea' play-book. The massive tariffs will crush an already challenged Iranian economy and force them back to the negotiating table. European allies had signalled an intention to continue the old 'Iran Nuclear Deal' but the prospect of US sanctions will ensure solidarity. Oil prices jumped.

Commodity currencies managed to stabilise, as associated prices rallied, boosted by the Geo-Political developments. The AUD jumped above 0.7550, while the NZD consolidated above 0.6900, halting the recent losses. Both currencies are beneficiaries of improved trade conditions and fiscal progress, but remain technically vulnerable.

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