The degree of tension in the trade conflict between the United States and China rose to the limit, but the parties promptly moved back. Monday was really hard for the stock market and touched the foreign exchange market. The most important USD/CNY rate in the world rose most strongly in a year, reaching 6.88 at the moment.
Donald Trump expressed his willingness to meet with Xi Jinping at the G20 summit, scheduled for June 28-29. It seems that there are several weeks of intense confrontation ahead, but this is better than yesterday's sharp exacerbation of rhetoric on both sides. Since no further escalation occurred, the risk appetite increased slightly, especially since Beijing called for "wisdom" and expressed hope for a deal.
Now China is expected to agree to a meeting with Trump on the sidelines of the G20 summit. If such a sign is received, then traders will have more reasons to believe that China will continue to hold the bar for the USD/CNY pair. It is possible that the Chinese authorities will start to bring the course straight to 7.00 as part of negotiation tactics. However, until the end of June, everyone will be in limbo, and the market is unlikely to take any direction.
As for the USD/JPY pair, its rate bounced after yesterday's reaction to the strongest sell-off in stock markets. The events of Monday remind us of how weak the transfer of traditional risk-free behavior to the strengthening of the yen turned out to be.
Despite the pair's growth, buying the dollar in the short term should be viewed with caution. The greenback will likely retain the status of an outsider against the yen and the franc. On Wednesday, additional pressure on the dollar could come from the possibility of weak retail sales data. According to the forecast, the activity of American consumers in April was minimal over the past six months. If expectations come true, the USD/JPY pair risks going below 109.