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USD/CNH : Consequences of Trump`s Pressure To China

(Sat, 30 May 2020). President Trump formally announces the United States will revoke Hong Kong’s preferential treatment amid escalating China tension. US Dollar drifted lower as the Chinese Yuan rebounded and pushed USD/CNH price action 300-pips lower from intraday highs despite Trump’s harsh remarks directed at Beijing.

Trump stated that the White House wants an open and constructive relationship with China, but mentioned how Beijing has violated promises made to Washington and that the world is now suffering due to China’s negligence and coverup of the coronavirus outbreak. Further, the national security law China levied on Hong Kong earlier this week stands to blatantly undermine Hong Kong independence and autonomy according to President Trump.

Trump responded by stating that the United States will sanction Chinese officials and formally revoke Hong Kong’s preferential trade status. Nevertheless, markets have so far overlooked the threat of a breakdown in Sino-American relations and the recently inked phase one trade deal between Washington and Beijing.

 

US DOLLAR INDEX PRICE CHART

The US Dollar basket (DXY Index) took a spill amid the Trump-China press conference, but USD price action has edged notably higher from session lows on balance. Protracted US Dollar weakness corresponds with absent demand for safe-haven currencies and broadly mirrors the Chinese Yuan rebound.

 

USD/CNH – US DOLLAR TO YUAN PRICE CHART

The US Dollar pivoted lower against the Chinese Yuan in response to commentary from US President Trump. This comes subsequent to spot USD/CNH price action spiking to the 7.2000 level earlier this week – the top emerging market currency pair’s strongest reading since September 2019. USD/CNH now trades 300-pips lower from its intraday high and underscores the risk-on tone expressed by market participates in the wake of Trump’s presser.

 

 

 

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