The Chinese commerce ministry has announced that trade negotiator Li Chenggang will visit Washington this week with a team to meet US officials. Reports say that Li is expected to meet only with US deputy-level officials. These discussions aren’t considered formal negotiations between the two countries.

Nature Of The Visit

Li Chenggang’s trip won’t include a meeting with US trade representative Greer. It’s also important to mention that the visit was not initiated by the US, adding to the complexity of the situation. We believe the announcement of this Chinese trade delegation is unlikely to significantly impact the market. Since the talks will involve only deputy-level officials, a major breakthrough is unlikely, which should help keep market volatility in check. The CBOE Volatility Index (VIX) is around 16.5, and this news doesn’t provide strong reasons for a sharp increase in volatility in the near future. For traders involved in sectors sensitive to US-China relations, like semiconductors and industrials, this situation could offer a chance to earn some income. Strategies such as selling out-of-the-money call options might make sense, as the chances of a major positive announcement have decreased. For example, the semiconductor sector has faced recent declines, like the 4% drop in the SMH ETF over the past month, suggesting that any upside could be limited. The ongoing uncertainty is also significant for currency markets, especially the USD/CNH exchange rate. Right now, this pair is trading close to 7.28, and the stalled talks suggest that Chinese authorities are not inclined to allow the Yuan to appreciate significantly. This environment favors strategies that expect continued stable trading or a slow decline of the CNH against the dollar.

Historical Context Of Trade Headlines

We recall the time between 2018 and 2020 when similar trade news could move the S&P 500 by over 1% in just one day. However, the limited nature of current diplomatic talks indicates that we shouldn’t expect such sharp reactions in the coming weeks. The greater risk now is slow progress driven by fundamental factors, rather than sudden turmoil from a cancelled high-level summit. Create your live VT Markets account and start trading now.

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