The market was abuzz with news during Thursday’s Asian trading session after the Federal Reserve announced that it would be holding interest rates stable, and a U.S. delegation arrived in Beijing to broker trade talks that could potentially impact China’s trade policies. The trade negotiations, brokered by U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He, will focus on many U.S. complaints about China’s current trade practices.
It was hardly surprising that U.S. President Donald Trump expressed great optimism about the talks, tweeting that “Our great financial team is in China trying to negotiate a level playing field on trade! I look forward to being with President Xi in the not too distant future. We will always have a good (great) relationship!”
Still, despite Trump’s excitement, analysts are worried that two days of meetings are not enough to create a long-term solution. More likely is the possibility of a short-term deal that would delay the U.S. tariffs on $50 billion of Chinese exports.
China has been open with its intention to “stand up to the U.S.” if necessary.
The dollar was trading lower against its major trading partners on Thursday morning. The dollar index was down 0.22 percent to 92.51 .DXY as of 1 p.m. HK/SIN, with the greenback struggling against the euro, the yen and the Australian dollar.
Fed Holds Rates
The Federal Reserve voted unanimously to keep interest rates steady on Wednesday at the end of its two-day policy meeting while expressing confidence that it is close to reaching its target inflation rate. If this happens, interest rates would likely be raised again in June.
The U.S. economy is now in its second-longest expansion since World War Two. Unemployment is at 4.1 percent, a 17-year low. Moody’s rating service has even predicted that U.S. unemployment can near the 3 percent range in May’s non-farm payroll reports that will be released on Friday. There are also signs of wages moving higher after lagging in recent months. While low unemployment is often desirable, it could cause problems for employers looking to hire qualified candidates who cannot find available applicants.
The Federal Reserve made no comments relating to the brewing trade war with China or how an escalation could potentially impact the U.S. economy.