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  • Trade war headlines are underpinning a risk-on environment.
  • US Vice president Pence comments on trade deal outlook.  

US Vice president Pence has crossed the wires, echoing his superior’s recent comments that the  “Trump administration hopes that phase 1 of China trade deal with additional agricultural purchases can be confirmed in Chile next month.”

Additional comments:

  • Pence says Trump hopes that after phase 1, the US and China can move to structural issues.
  • Pence says Trump administration believes that if US and China can get the economic relationship right it can lay the foundation to address other issues.

FX implications:

All systems are go on the trade deal front by the sounds of things, but as ever, the risk is that at a drop of a negative headline and a deterioration of such sentiment can send markets into panic mode which makes for a cautious approach  from investors towards  risk-on assets and FX. The Yen, Yuan, US Dollar and AUD are the most correlated currencies. AUD/JPY trades as a proxy to such headlines, rising on positive headlines and falling on negative headlines. Considering Pence has echoed what the markets have already priced, his comments have not made any material impact on market price action  today.