Update On Trade War: Optimism Boosted Risk Appetite

Over the weekend, trade sentiment was improving with both sides getting close to a possible phase one trade deal. Despite the US Hong Kong bill which was approved by the Congress, President Donald Trump had yet mentioned that he will be signing the deal. 

Being well aware of the current situation, signing of the bill would not only infuriate China counterpart, but also negatively affects future trade negotiations. President Trump said that he supports Hong Kong, however he also wants a deal to be done while declining to say that he would sign the bill. Reports also showed that US might delay the December 15 tariffs if no deal is achieved by then. 

On China’s side, President Xi Jinping lately stated his willingness to work out on the phase one agreement with US, on the basis of mutual respect and equality. Xi also stated that they are working actively to prevent the trade war from worsening. 

Recent reports showed that China is currently considering to raise penalties and tighten laws towards the violation of intellectual property (IP) rights. The rights on IP in China is one of the key issues accused by the US. Actions taken by China side showed signs of compromise which would further ease trade negotiations for both sides. 

Market participants are still waiting for further clarity on the venue and date for both sides to sign the phase one trade deal. In the meantime, tensions between two parties slowly diminishes, however remains uncertain. Current optimism had led to sell-off in safe-haven assets, while investors diving into dollar market.