Renewed Hope of China Trade Deal to Boost USD Forex Market

• Positive Trump comments on potential trade deal.
• Forex markets could react positively at opening on Monday.
• Phased deal looks the most likely. Phase one to be signed soon.

US President Donald Trump has delivered the most positive news in quite some time to the forex market. This comes in the form of his Tweet regarding a productive talk with Chinese leader Xi Jinping. “Had a very good talk with President Xi of China concerning our giant trade deal” came the news from the President's Twitter account on Friday.

This development would be substantial and very positive in terms of how the USD forex market and economy, in general, could react. The two sides have been deadlocked on a potential deal for some time. Both superpowers have instead engaged in tit-for-tat sanctions in what is seen as generally negative for both sides.

How will Monday's forex market react?

Views from around the sector are all pretty much unanimously of the view that the USD forex market will react positively to the news. There has been little in the way of good news lately for the market. The GBP/USD pair saw it's biggest losses in many years before markets closed for the weekend. This is despite the positive signs shown when Boris Johnson's conservative party romped to victory in the previous week.

All things considered, most traders and analysts alike will be expecting a risk-on rally to take shape when the markets open for business Monday. This type of rally is often seen when investors anticipate a high risk/reward payoff and the market sentiment is showing positive signs.

China more cautious but still hopeful

It is fair to say that the reaction coming from Beijing and Xi has been much more muted. Although phase one of a deal has been all but agreed, the Chinese leadership still had some causes for concern during the call. President Xi noted the continued US interference in issues surrounding Hong Kong, and Taiwan in particular. These are issues which Beijing considers to be Chinese domestic affairs, something which was made clear.

“US behaviors have interfered in China's internal affairs and harmed China's interests, which is detrimental to mutual trust and bilateral cooperation.” This was the word quoted from Xinhua Chinese state news agency. That aside, this is the first step of cautionary progress.

Chances of the deal holding up

This is phase one of the deal which looks set to hold off at least $160 billion of tariffs on Chinese made consumer goods which has already been implemented. Both sides are said to have agreed on further phases of the deal. This will no doubt be positive news for the forex market and general economies of both. Many are skeptical though of any true deal actually emerging. The general thought is this announcement serves the political interests of both at the moment. Trump, of course, has his reelection campaign on the horizon. China, on the other hand, has the Beijing Winter Olympics in 2022. The next chapter is poised to play out.