A trade with China could stop the dollar's rise, but it cannot stay down if President Donald Trump then turns his focus on tariffs on European cars.
If the US and China were to enter into a trade agreement, it would be a decline as the foreign exchange markets jumped and the euro gains, at least in the short term. national security issues, and many analysts believe it will recommend tariffs for European vehicles es February 17, and the administration will then have 90 days to respond to it.
Mark. McCormick, TD Securities' main currency strategist, said the euro could come to the top of its latest range at around $ 1.16 after a Chinese deal. "If there are European rates, we go to 1.10," he said. The euro / dollar was at 1,1264 on Wednesday.
"The markets are trying to price different outcomes, and they all exceed because no one has any conviction about what to do in any asset class," McCormick said about the impact of trade wars. "It weakens global growth. It affects US multinational activities, it affects local economies, it changes monetary policy tracks. It becomes a very challenging environment for creating scenarios. Everyone is just waiting for a solution, whether it is Brexit, Trump China Trade Issues, are some of the broader trade talks. "Meanwhile, the euro has responded to weakness in European data, concerns about Brexit and trade uncertainty. Export experts have said that the United States is likely to reach a China agreement before turning to Europe, and Trump may well introduce tariffs.
"Auto tariffs would hit the euro area very strongly. It would be a negotiating strategy. Problem with this again is that you may have a very negative reaction to global financial markets as such things would undermine the sustainability of it. kind of approach, "says Ben Randol, G-10 foreign strategist at Bank of America Merrill Lynch. "It just feeds the story of a generalized global trade uncertainty."
The euro would dive on new rates and the dollar would strengthen.
"The US dollar is facing trade uncertainty problems because the rest of the world is hurt more," Randol said.