Exciting Prospects! Foreign exchange market in Q1 2019 [Jiro Ota]

Jiro Ota Profile

Jiro Ota. FX Strategist. Began FX trading in 1979 at The First National Bank of Boston Tokyo Branch. Later worked in corporate foreign exchange at Manufacturers Hanover Trust Bank, BHF Bank, National Westminster Bank, and ING Bank, then moved into retail FX, worked in sales at GFT Tokyo, later gaining experience as a market strategist, and is now active as an individual investor.

*This article is a republication/edit of an article from FX攻略.com March 2019 issue. Please note that the market information stated in the text may differ from current market conditions.

Unchanging U.S. Pressure on China

President Trump's hardline stance remains, and the temporary slowdown in U.S. interest rate hikes aimed at avoiding an economic downturn has shown signs of a dollar rally resurgence. The Trump administration continues to pursue policies aimed at correcting the trade imbalance with China while also pursuing security-conscious measures such as excluding Huawei, the largest Chinese telecommunications equipment company, from products.

There is concern that a protectionist, domestically prioritized U.S. trade policy could slow global growth, but if a recession were to occur, the United States has an advantage given it has already implemented eight rate hikes from 0.50–0.75% in December 2016 to 2.00–2.25% by September 2018; other major countries are limited in comparison.

The 90-day ceasefire agreement on U.S.–China trade from the December 1 summit will end on March 1, and the United States is unlikely to ease its stance on trade issues. Fears of intensified U.S.–China trade frictions persist, and there is a risk of a 2019 recession. This could influence the Federal Reserve's policy on rate hikes, and its impact on the dollar exchange rate seems unavoidable.