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Forex- Euro and Yuan Slide as Talks of a Trade War Continues

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The euro has fallen by almost half a perfect and the yuan has also dropped to a 14 month low as well. This comes after a flare-up with trade tensions. This is between the US and China, and ever since this happened, China have been scrambling to try and buy as much of the dollar as they possibly can. The officials over at the US administration have been saying that Donald Trump has proposed a 25% tariff that is going to be placed on over $200 billion worth of goods from China. This is going to change-up the global market and it is also going to send any kind of equity market into a huge tumbling spiral. China has tried to urge the US to see reason but this is not the case so far. China’s yuan has been under pressure for quite some time and there are also worries about the month’s long trade dispute as well. A lot of people believe that this is going to hurt the economy and that this has slid by another half a percent as well. So where do you go? If you are dealing in currency then it is important that you go to the currency that is most stable.

You also need to go to a currency that has some kind of yield as well. This comes from Michael Hewson who is a chief analyst at CMC market. He believes that the dollar index measures itself against six other basket currencies. The Australian dollar has seen a proxy for Chinese growth when compared and the main reason for this is because of Australia’s own export-reliant structure.

The safety bid for the dollar has been bolstered by the US Treasury yield and this has come with an upbeat assessment from the Federal Reserve in general. They have ended their two-day policy meeting and the FED have also left interest unchanged and this was expected. They have said that the US economic growth has been rising and that the job market has also been on the rise as well. The only change that has happened recently is also worth highlighting and the main reason for this is because of the upbeat growth in the economic activity. The FED now regards this as being strong rather than solid.

 The yen has bucked the trend of weakness and it has also risen by 0.2% as well. This is against the yen and it is a benchmark as well. Japanese government yields are high at the moment but the yen’s gains really were limited after they happened to drop on Tuesday. The Bank of Japan has made a pledge and that is to try and keep rates low for a very extended period. The British pound has also fallen by 0.4% and this is when the Bank of England’s policy falls into place. A lot of people expect it to raise rates since the global crisis. Of course, it’s important to know that the Mexican peso did find some support from a lot of growing optimism and this comes after some renegotiation from the Trade Agreement.

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