US-China phase one trade deal done at last

US and China finally inked the phase one trade deal as expected with fresh details few and far between, leading to the muted reaction within markets.

The ninety over pages of document had certainly been furnished with great more details compared to the December two-page fact sheet on items ranging intellectual property, trade to financial services concerns. That said, the broad strokes that continue to characterise some of the key items such as intellectual property protection and technology transfers remains the case.

While a breakdown of the $200 billion of additional imports from the US to China in two-years had been revealed with manufactured goods and agriculture goods to account for approximately 39% and 16% of the total imports respectively, the means to go about achieving such a significant uptick remains elusive. Enforcement had also been outlined within the agreement though the next steps had been kept relatively vague with no stated timing for further negotiations that could keep markets pining for updates. Odds are that we will only see a phase two trade deal post November’s US election, which also appeared to have been President Donald Trump’s preference. In the mean-time it will a wait-and-see for business confidence improvements or pick up reflected by business in the US to inject further optimism from a US-China trade perspective.

Some of the items perhaps carrying greater implication for the market in the near to medium term are the currency enforcement mechanism and China’s opening of its financial sector. After having been removed from the list of currency manipulator by the US, the latest agreement between the two countries reflected China’s commitment to market-determined exchange rate regime. At the same time, the bringing forward of China’s opening up of the domestic market to foreign financial institutions may also be a welcoming move if properly administered. While we have yet to see the slew of economic data into the end of the week including China’s Q4 GDP, this latest node in confirming some middle ground between the two sides nevertheless marks a positive sign.

Looking at USD/CNH which had been particularly sensitive towards the latest phase-one trade deal formulation coupled with the stabilization of economic data, prices had remained in a downtrend through Q4 2019 and into the start of the new year past 6.90. This level may serve as a near-term resistance for prices and a bullish scenario could potentially see prices back to the early 2019 lows of around 6.70, before things flared up again, if we do get expectations of further tariffs rollbacks down the road.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.