The risk appetite in global markets has worsened early on Tuesday as traders react to White House trade adviser Peter Navarro’s latest comments about the US-China trade deal being over, sending riskier currencies like the AUD, NZD and Chinese Yuan down. At the time of writing, the US dollar index DXY is trading steady around 97.04.
Navarro’s statements from Monday heightened worries about US-China tensions, as markets fear that worsening relations between the two world leaders could impact international trade, and even disrupt global supply chains and capital flows in the near future. Amid the ongoing coronavirus crisis worldwide, escalating tensions between the US and China could impede economic recovery and markets under pressure.
Previously, the US dollar had been showing signs of weakness amid an improvement in market sentiment over hopes of economic recovery resuming as countries emerged out of lockdown and got back to work. This had dented the safe haven appeal of the Greenback and helped riskier currencies climb higher.
For now, the US dollar also remains supported over the spike in coronavirus cases globally with the number of infections marking a record rise the world over on Sunday. There has also been a sudden increase in the number of cases across western states in the US as well as in Brazil recently, raising fears about a possible second wave of the pandemic as economies reopen.