- Major currency pairs trade in a narrow range
- Trump threatened Mexico with unfavorable results over NAFTA
- Tariffs undermining the export sector
On Wednesday, the world’s most important forex currency pairs were trading in a relatively narrow range as traders in Asia waited for the meeting between US President Donald Trump and EC President Jean-Claude Juncker.
The focus of this meeting will be the growing trade tensions between the two economic blocks that have been placing a lot of pressure on markets in recent weeks.
The USD index traded predominantly sideways in early trade, increasing by 0.02% to 94.63.
The USD/EUR rate increased by 0.01% in morning trade, while the HK/SIN traded at $1.1682. The greenback was 0.08% stronger against the JPY and reached 111.28. It also notched up moderate improvements against the Canadian dollar and Swiss franc during early morning trade in Asia.
On Tuesday, Trump once again resorted to “diplomatic scare tactics” when he wrote to Mexican president-elect Andres Manuel Lopez Obrador that he wanted a fast renegotiation of the North American Free Trade Organization (NAFTA).
He said that a failure to do so would result in unfavorable results for Mexico. Writing to the incoming Mexican president, the US president stated: “A strong relationship will lead to a much stronger and more prosperous Mexico, which frankly would make me very happy!”
This letter was intended to rekindle the US-Mexico relationship, which went sour during the presidency of Enrique Peña Nieto.
Even if the global trade war does not escalate any further, analysts are concerned that the US economy might nevertheless be harmed. The tariffs announced by Trump earlier, combined with increasing interest rates and a strong USD, are eroding the competitiveness of exporters, including manufacturers. This could severely hamper the economy and will affect smaller cap businesses in particular.