US DOLLAR SUPPORTED, S&P 500 INDEX PRICE OUTLOOK AT RISKAMID ESCALATING CHINA TENSION & LINGERING VOLATILITY

US DOLLAR SUPPORTED, S&P 500 INDEX PRICE OUTLOOK AT RISKAMID ESCALATING CHINA TENSION & LINGERING VOLATILITY

• USD price action catches a bid owing to rekindled risk aversion and US Dollar demand
• S&P 500 slides as US-China tension escalates and market sentiment deteriorates
• Choppy ranges underscore the juxtaposition of coronavirus vaccine hope with fresh trade war uncertainty

The US Dollar gained ground while the S&P 500 Index edged lower throughout Thursday’s trading session. The latest slide in stocks, and move back into safe-haven assets like the USD, looks largely driven by an uptick in perceived trade war risk as tension escalates between China and the United States once again.

In addition to the Senate Oversight Bill just passed by US Congress, which could force Chinese stocks to delist from American exchanges, President Trump has recently talked tariffs and increased his hawkish rhetoric aimed at Beijing.

US DOLLAR BOLSTERED, S&P 500 PRESSURED AS CHINA TENSION INTENSIFIES

Investor exuberance nevertheless remains fostered by efforts toward reopening the economy from the ‘great lockdown’ and progress made on finding a potential coronavirus vaccine. This fundamental theme poses a conflicting driver that broadly enhances risk appetite and 

In fact, stocks are now down only 10% year-to-date measured by S&P 500 performance while the VIX Index trades about 50-points below its recent swing high. Anxiety surrounding possible responses from China, as well as the chance that Sino-American relations worsen further, present material headwinds for the S&P 500 Index, however.

US DOLLAR TO YUAN PRICE CHART WITH S&P 500 INDEX OVERLAID