US Pres. Trump signs Hong Kong Bill that will strain relations with China - Bloomberg

Early Thursday in Asia, the White House crosses the wires, via Bloomberg, while announcing that the United States (US) President Donald Trump signed the bill in support of the Hong Kong protesters. The US Congress has already given its go to the Hong Kong Human Rights Bill a few days ago but the bill was on President Trump’s desk before being the law. Now it has the sign, it will be announced as a law, which in turn will trigger China’s harsh reaction and could also spoil the recently improving trade relations between the US and Beijing.

Key quotes

The legislation, S. 1838, requires annual reviews of Hong Kong’s special trade status under American law - and sanctions against any officials deemed responsible for human rights abuses or undermining the city’s autonomy.

The new U.S. law comes just as Washington and Beijing have shown signs of working toward what the White House calls a “phase-one” deal to ease the trade war.

Trump would like the agreement finished in order to ease economic uncertainty for his re-election campaign in 2020, and has floated the possibility of signing the deal in a farm state as an acknowledgment of the constituency that’s borne the brunt of retaliatory Chinese tariffs

U.S. and Chinese trade negotiators will continue communicating closely and work toward a phase-one deal, Ministry of Commerce spokesman Gao Feng said at a briefing in Beijing on Thursday.

FX implications

With the news being ‘A’ list risk event, mainly due to the Chinese part of it, the USD/JPY dropped nearly 15 pips to 109.40 after the release. China has already warned multiple times to the US to not interfere in its “One Country, Two Systems” era.