US President Trump has confirmed he will attend the ASEAN Summit in Malaysia this October, as announced by Malaysian Prime Minister Anwar Ibrahim. An update on new tariffs for Malaysian goods is expected soon. The summit will take place from October 26 to 28, just before a 90-day trade truce extension announcement between the US and China. This timing suggests important discussions may happen at the event.

China’s Influence in ASEAN

China’s influence in ASEAN is on the rise, which could attract many high-profile attendees to the summit in Malaysia. Chinese President Xi Jinping, who visited ASEAN in April, might be there as well. This setting increases the chances for a meeting between Trump and Xi at the end of October, which could affect trade discussions. Observers should keep a close eye on developments. With the upcoming tariff announcement for Malaysia, we can expect immediate changes in the Malaysian Ringgit (MYR). The currency market will react first, making options on the USD/MYR pair very active. Looking back at early 2023, Malaysia’s trade with the US exceeded $40 billion, so any tariff changes will greatly impact the currency. The potential Trump-Xi meeting in October creates eight weeks of uncertainty in the markets. We should expect increased volatility in major indices like the S&P 500 and the Hang Seng. We witnessed similar patterns during the 2018-2020 trade tensions, where the VIX steadily rose before high-level talks.

Impact on Markets and Currencies

This setup presents a classic scenario for trading the Chinese Yuan and the US Dollar. The offshore yuan (CNH) is likely to reflect trade sentiment, while the dollar may gain strength if tensions escalate. Just last month, in June 2023, the CNH weakened significantly on rumors that the current trade truce might end, highlighting its sensitivity. The summit’s location in Malaysia also puts regional markets in the spotlight. The ASEAN economy is now the fourth largest in the world, with a combined GDP expected to reach $4.5 trillion by the end of 2025. A positive outcome from the summit could boost ASEAN-focused ETFs and currencies from key trading partners like Singapore and Vietnam. For the next few weeks, it’s wise to focus on trading the anticipation instead of the event itself. This means considering buying options now, such as straddles on the Hang Seng Index, to prepare for significant price swings as October approaches. Acquiring this volatility exposure in August is likely to be cheaper than waiting until late September when the event risks are already priced in. Create your live VT Markets account and start trading now.

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