US-China trade deal heralds period of lower volatility for investors
Today’s agreement appears to be a “win” for both sides. The US negotiated a one-year reprieve from sweeping rare-earth export controls and received a pledge from China on agricultural purchases. China, meanwhile, had their fentanyl-related tariffs halved to 10%.
The market reaction resembled a “buy the rumour, sell the fact” pattern, with investors already bracing for some positive news following earlier encouraging signals, particularly from Treasury Secretary Bessent. We regard the outcome as positive, though not unexpected. Touch wood, the worst of the trade war appears to be behind us, but the relationship will need to be managed carefully.
A flare-up in tensions down the road is not entirely out of the question, as some important issues remain unresolved.
Moving forward, investors may see lower volatility, as one of the biggest tension points that rocked markets earlier this year has been dealt with.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
