U.S. and China phase one agreement

Daily Analysis - 16/01/2020

What the two countries agreed in the phase one

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Yesterday the second biggest economy of the world China accepted to buy an extra $200 billion in U.S. products covering the next two years as a vital component of the “phase one” trade agreement. The extra purchases will come to cover the 2017 U.S. export estimates. The agreement specifies that China will purchase $77 billion in extra goods and services in 2020 and moving forward to 2021 another $123 billion to reach a total of $200 billion. China purchased $186 billion of U.S. products and services back in 2017. Mixed with the latest incremental deal, U.S. exports to China should basically rise to $263 billion in 2020.

Gold holds its position


On Thursday the safe haven Gold continued to be constant following the United States and China confirmation of an introductory trade agreement, while traders entered uncertainty mode. The reason for the uncertainty were several sensitive matters that continued to be unresolved among the world’s two greatest economies. Spot gold was exchanged at $1,555.73 per ounce while the U.S. gold futures advanced to $1,556.19. The long awaited Phase 1 trade agreement was approved by the Chinese Vice Premier Liu He and the United States President Donald Trump yesterday, pausing an almost 19 months of tensions that has disturbed the global markets.

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Asian currencies supported by trade deal


On Thursday the Asian currencies went higher boosted by optimism regarding the U.S.-China trade agreement that may introduce a friendlier relationship between the world’s two largest economies. The Citi’s head of Asia investment strategy Ken Peng, stated “The message is actually very, very simple: Tariffs are not going up this year. And that’s really all we need”. The U.S and China promoted the Phase one trade deal, and confirmed it overnight at the White House, as a positive move toward a resolution to their intense trade conflict. The Australian dollar continued to be stronger at $0.6909. While the safe haven Japanese yen was a little weaker at 109.91 per dollar.

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Oil retraced following the trade deal


On Thursday Oil prices somewhat increased following the approval of an introductory China-U.S. trade agreement that establishes the platform for positive momentum in Chinese investments of American energy goods, while U.S. crude stocks dropped more than anticipated. U.S. crude advanced 39 cents, at $58.19 a barrel while Brent went up 45 cents, at $64.44 a barrel.

 

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