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Thomson Reuters
Feb 08 - 02:36 PM
USD/JPY - COMMENT-Market Still Bets On US-China Deadline Delay, USD/JPY Shows
First appeared on eFXplus on Feb 08 - 12:30 PM

News that the U.S. and Chinese presidents will not meet before their March tariff deadline has disappointed markets, but price action in risk-sensitive USD/JPY suggests traders expect the countries to extend their truce while negotiations continue. USD/JPY is showing stoicism in the face of derisking illustrated in falling Treasury yields and stocks and a rising VIX. The no-meeting news nL1N2020UM means trade-war anxieties will simmer as the two sides wrangle over core, structural disagreements.
China's offer to buy more U.S. goods and open up U.S. investment, particularly in the financial sector -- something that could benefit China as it looks for greater international demand for its debt -- could be the quid pro quo for forestalling U.S. tariffs spiking to 25 percent from 10 percent.
Both sides could claim a win and fear of increased global economic and financial instability would subside, albeit temporarily.
Whether that would be enough to propel USD/JPY above well-established supply near 110 remains to be seen.
Two-year Treasury yields back below the 2.5 percent Fed funds rate doesn't bode well for the rates-sensitive USD/JPY.
China credit data Sunday nL3N2000JI and reports from next week's U.S.-China trade talks nS0N1Z001L are nearby event risks.

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Source:
Thomson Reuters IFR Markets

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