Trade disputes are still the center of attention Wednesday morning, but markets are staying optimistic that the U.S. and China will resolve their differences. The pound jumped on upbeat inflation figures, but then fell on negative Brexit reports.
A tale of two trade disputes
The U.S. is navigating two different disagreements on trade this week. The U.S.-China trade war escalated tremendously yesterday with tit-for-tat tariffs, and now it appears the U.S. and Canada are stuck over key details – including dairy – to a NAFTA replacement.
U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland will meet in Washington on Wednesday to discuss a path forward as the clock ticks.
The two countries have until the end of the month to reach and publish an agreement, with Thursday seen as the deadline to an agreement so there is time to write the document.
The U.S. reached a deal with Mexico to replace NAFTA, however, Congress is hesitant to approve a deal without Canada.
Dollar dips on China’s promise not to devalue yuan
The dollar is not benefitting from the escalating trade war, weakening this morning for the second day in a row.
Of course, there is still concern about the trade war’s impact on the global economy, investors have had time to prepare themselves.
The dollar dipped Wednesday morning after Chinese Premier Li Keqiang said China would not devalue the yuan as a response to the recent tariffs.
The dollar then gained on the euro and the pound as Brexit negotiations hit a snag.
Brexit Irish border issue pulls down pound
A day before the informal E.U. summit to discuss Brexit, there are reports that the Irish border could once again be a sticking point.
Prime Minster Theresa May is reportedly ready to reject the E.U.’s solution to the Irish border. The pound plunged on the news.
GBP/USD spiked from better than expected consumer price index numbers, climbing from 1.315 to 1.320. The CPI for August hit 2.7% compared to estimates of 2.4%. The core number came out at 2.1% instead of the expected 1.8%.
But then Brexit concerns caused GBP/USD to dive to 1.313. The pair is hovering around that mark on USD weakness and Brexit concerns.
The latest snag in Brexit is also weighing on EUR/USD, which dropped from 1.171 to 1.166 Wednesday morning.