MUFG Research discusses the recent developments on the US trade deals and the related potential impact on the USD.
"While we understand the enthusiasm that has greeted this trade deal with Mexico we see reason for caution. The real fight is likely still ahead and with the public consultation period over tariffs being implemented on USD 200bn worth of China imports ending tomorrow, it will not be long before investor attention shifts back to the more concerning conflict with China.
Finally, it is also worth noting that this “deal” is in fact still a long way from a deal. While the new Mexico administration under incoming President Andres Manual Lopez Obrador is supportive, this will not get US Congressional approval before the mid-term elections on 6th November. Until Canada is onboard and until we know more on how the Republicans do in the mid-terms, this ‘deal’ could unravel quickly," MUFG argues.
So we are somewhat cautious over further dollar selling on global trade optimism from here," MUFG concludes.