The currency markets for the major Forex pairs traded in a narrow range on Wednesday morning in Asia as traders waited for a meeting between U.S. President Donald Trump and European Commission President Jean-Claude Juncker in Washington on Wednesday which will focus on the trade tensions between that have been pressuring markets and politics in recent weeks.
The dollar index traded mostly flat in early trade, up 0.02 percent to 94.63 .DXY. The dollar was up 0.01 percent against the euro as of 11:02 a.m. HK/SIN to trade at $1.1682. It was up 0.08 percent against the yen to 111.28. The greenback also saw modest gains against the Swiss franc and the Canadian dollar in the early Asian morning.
President Trump once again used his “diplomatic scare tactics” on Tuesday, writing to Mexican president-elect Andres Manuel Lopez Obrador that he seeks a quick renegotiation of the North American Free Trade Organization (NAFTA), and that failure to do so would yield unfavorable results for Mexico. In the letter Trump wrote: “A strong relationship will lead to a much stronger and more prosperous Mexico, which frankly would make me very happy!” Trump wrote in the letter. The letter was intended to restart relations between the U.S. and Mexico which were damaged during the prior presidency of Enrique Pena Nieto.
Even if the trade war doesn’t escalate beyond its current point, some analysts worry that there may still be damage to the U.S. economy. The tariffs implemented recently by President Trump, combined with the strong dollar and rising interest rates undermine the competitiveness of manufacturers and other exporters which could wreak havoc on the American economy. Though the direct impact of the tariffs has yet to be seen, skeptics have already voiced their concerns about the potentially devastating impacts, with smaller cap companies being hurt the most. At this point, however, traders are showing their concerns with the currency trades and waiting to see what happens next.