Muted reaction in currencies to US-China trade deal
LONDON, Jan 16: Major currencies mostly shrugged off on Thursday the signing of the Phase-1 trade deal between the United States and China, as most of the issues agreed upon had been expected by investors since the summer.
Euro/dollar, the most fluid currency pair, was last trading up 0.1per cent at $1.1164 EUR=EBS, matching the one-week high it reached the day before.
An index which tracks the dollar against six other major currencies fell to an eight-day low of 97.14 .DXY. Beijing and Washington touted the Phase 1 deal, signed late on Wednesday at the White House, as a step forward in resolving their bitter trade dispute.
US Vice President Mike Pence fed optimism about further progress, saying further Phase 2 discussions had already begun.
Yet market exuberance was checked because much of this was priced in already and because it addresses few of the issues that led to the trade conflict in the first place.
"Yesterday's signing of the phase one trade deal provided confirmation of the progress made in trade talks since last summer. The details of the deal were broadly in line with expectations which have dampened the market impact overnight," said Lee Hardman, currency strategist at MUFG.
But other than the fact that it met expectations, analysts said the agreement does not fully eliminate tariffs and is vague on enforcement, and makes no real progress on host of thorny problems. Some were also skeptical that purchase targets set out in the deal are realistic. -Reuters