The US dollar has previously been the big winner of the trade dispute between the US and China, with investors flocking to the safe-haven currency amid growing global uncertainty.
However this appears not to have been the case on Monday when the ‘greenback’ tumbled as President Trump announced the imposition of tariffs on a further $200bn worth of Chinese goods.
Analysts have attributed this sudden reverse in the dollar to concerns about how China will respond, following reports it would take retaliatory action against the US.
Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo said: “Of immediate concern to the market is how China responds to the tariffs.”
So far Beijing is yet to respond, but reports in Chinese media suggest authorities may choose to cancel tentative plans to send Vice-Premier Liu He to Washington for negotiations.
At the same time the pound is in a holding position this morning as investors await the publication of the latest Brexit impact report from government advisors.
Today’s report is set to look at the impact Brexit will have on the British workforce, with projections on how migration could be impacted by the UK’s exit from the EU.
With evidence from over 400 businesses, industry bodies and government departments, the report will give pound investors an idea on some of the risks Brexit may pose.
Looking ahead to Wednesday’s trading session, tomorrow’s CPI figures are forecast to show domestic inflation slowed from 2.5 per cent to 2.4 per cent last month.
Meanwhile, limited releases of US data until the tail end of the week will likely see the US-China trade dispute remain as the main catalyst for movement in the US dollar tomorrow.