The upcoming US-China trade talks are in market focus now, with the two countries continue to flex muscles. In the latest move, Washington imposed visa restrictions on Chinese officials accused of involvement in repression of Muslim populations. In turn, Beijing said the US was using the excuse of human rights to interfere in the China’s internal affairs. As such, the uncertainty ahead of negotiations remains high, which unnerves investors.
Meanwhile, markets shift focus to the FOMC meeting minutes due later today. As a reminder, the Federal Reserve delivered a so-called hawkish rate cut in September, Investors assessed this step as a sign that it might be done cutting rates. However, considering the latest developments in economy and trade, the central bank could express a more dovish tone and hint at further cuts, as Powell did yesterday.
In such scenario, the greenback may turn even lower but the potential downside pressure will be limited as the greenback derives support from its safe haven status amid the latest escalation in the US-China trade relations.