USD surges with US set to sanction Hong Kong Leader Carrie Lam
USD has been catching a bid again on escalating US/China tensions. The latest update is that the Trump administration is poised to impose sanctions on Chinese officials including Carrie Lam, the leader of Hong Kong. The new sanctions will be announced today and will also target Chinese companies and Communist Party officials, according to sources.
Placing sanctions on the leader of Hong Kong is a BIG step up in tensions between the US and China over the latter’s recent imposition of National Security Laws in Hong Kong which are seen as crackdown on freedom of speech. China will probably be very angry, and will have to respond by potentially placing sanctions on high level US officials in return.
DXY has subsequently surged towards the 93.50 mark from its earlier just above 93.00 level.
Some might also argue that strong NFP data released today is also supporting USD, although USD’s the reaction to the data at the time was mixed.
The headline NFP number came in at 1.763mln, vs expectations for a reading of 1.6mln, a strong number. Moreover, the unemployment rate dropped to 10.1%, much more than the expected drop to 10.5% from last month’s 11.1% rate.
There had been some fears that we were going to get a bad NFP number given bad ISM employment sub-indices and bad ADP national employment data from earlier in the week. For this reason, thought the beat on expectations was only relatively small (around 200k), markets have breathed a sigh of relief – US economic momentum has clearly continued in July fairly well, particularly in the labour market.
Today’s price action serves as a reminder that US/China tensions continue to bubble under the surface, and may well be set to worsen further as we head towards the November election.
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