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US Dollar Weakens as Risk Currencies Back in Favor After Signing of Phase One Trade Deal

The US dollar has lost some of its sheen and is trading somewhat weaker against other major currencies following the signing of the US-China phase one deal, as investors switch to riskier currencies and assets instead. At the time of writing, the US dollar index DXY is trading around 97.19.

On Wednesday, the US and China came together to sign the phase one trade agreement, the first concrete step towards resolving the 18-month long trade war. While the first phase has a relatively limited scope, it still marks progress in the right direction towards resolving key differences that resulted in both world leaders hiking tariffs on each other’s goods for more than a year.

The US dollar typically enjoys support in times of uncertainty as it is seen as a somewhat safer currency or asset to invest in. However, the signing of the trade deal boosted the market sentiment, bringing back a risk-on mood and turning investors away from safe havens and towards riskier trades.

However, the dollar remains supported as there is still an air of caution in the markets on how effectively the interim trade deal will help improve relations between the US and China. One of the biggest concerns surrounds the continuation of tariff hikes, while markets are also concerned about how China will successfully commit to the new targets for higher purchases of US goods.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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