The FX market struck a cautious note on Wednesday ahead of the Phase One US-China trade deal signing.
The yen, a safe-haven currency, was steady against other currencies. Riskier ones lost slightly, with investors become jittery before the signing.
In China, the yuan dropped 0.2% to 6.8942. The Chinese currency has been the most sensitive to news about US-China negotiations.
The Australian and New Zealand dollars also stepped back. In Australia, the Aussie lost 0.1% at $0.6898. Meanwhile, the kiwi in New Zealand was also weaker at $0.6612.
The US dollar held at 97.339 against a basket of other major peers.
FX Market and the Phase One Trade Deal
The formal trade deal, if successful, could probably conclude an 18-month tit-for-tat tariff war between the two giant economies. However, only the tariffs will stop, but the more significant trade dispute will probably persist.
As if to reinforce this, US Treasury Secretary Steven Mnuchin said existing tariffs on Chinese goods would stay in place.
He said if US President Donald Trump “gets a phase two quickly,” these tariffs would be under consideration for release.
The US has already agreed to suspend tariffs on $160 billion Chinese-made electronics. It has also decided to halve existing tariffs of goods worth $120 million.
Meanwhile, the fx market also knows that China has pledged to buy nearly $80 billion in additional goods from the US. Under the deal, China will make purchases over the next two years.
As a result, some US experts deemed the pledge “unrealistic.”
Further, Mnuchin said the documents would come out on Wednesday. However, there will be exemptions. The confidential annex covering the purchases of products and services will remain hidden.
Elsewhere in the fx market, the British pound was slightly stronger ahead of the inflation data later in the day.
Consensus has it that core annual inflation would hold firm at 1.7%. However, traders are suspecting an interest rate cut by the Bank of England soon.
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