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USD: Break Or Make Time For US/China Trade Talks; What’s Next?

By Citi via eFXNews

Citi discusses the latest market condition amid the recent heightened trade tensions on the back of the announcement by US Trade Representative Robert Lighthizer that the US would raise tariffs on Chinese goods this Friday.

“Investors currently interpret the US move as an aggressive attempt to push China to make a deal rather than something that will force China to break the deal and take comfort from the news that  Chinese Vice-Premier Liu will still visit the US on Thursday despite the tariff threat.

Citi analysts think that “unless China walks away from the talks (which is not necessarily the same as Vice Premier Liu He canceling his trip but rather having no talks at all), the team does not expect an escalation of trade tensions into a trade war,” Citi notes. 

“Whatever the outcome, uncertainty is the key word even if a trade deal is concluded later on. So far, investors have yet to fully take on a “risk off” trade as seen by the rather moderate buying of safe haven currencies such as JPY, CHF and USD but this could change,” Citi adds. 

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