The USD held very steady throughout Monday’s Asian session and the European morning with its index against a basket of major currencies at 89.75; pretty much where it had closed on Friday evening. From around 7am New York time, however, the USD began a more broad-based sell-off as both GBP/USD and EUR/USD found some good buying interest. By the end of the day, the USD index had lost almost half a point from its intra-day high to 89.45.
After a weekend when he had sounded a bit more conciliatory on trade, President Trump once again took to Twitter to criticize current international trade arrangements. “When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE - going on for years!” Yesterday, the US stock market was at one stage up around 1.5% with the DJIA up more than 400 points before a late sell-off in the last hour of trading saw all the gains erased. Overnight in Asia, the DJIA has regained 300 points. It really is quite wild.
Overnight, Chinese President Xi Jinping gave a keynote speech at the Boao Forum – often referred to as the Chinese version of the Davos Forum, which is taking place on the tropical island of Hainan - where he addressed the trade situation. Xi called for an upholding of the multilateral trade system and said dialogue was the way to resolve disputes, diffusing trade tensions with the U.S. He vowed to open sectors of China’s economy from banking to auto manufacturing, increase imports and expand protection to intellectual property: "China does not seek trade surplus. We have a genuine desire to increase imports and achieve greater balance of international payments under the current account." He said countries should "stay committed to openness, connectivity and mutual benefits, build an open global economy, and reinforce cooperation within the G-20, APEC and other multilateral frameworks. We should promote trade and investment liberalization and facilitation, support the multilateral trading system… This way, we will make economic globalization, more open, inclusive, balanced and beneficial to all." The USD index opens in Europe this morning at 89.45.