- President Trump signs legislation to impose sanctions against those supporting China in restricting Hong Kong.
- China is worried about the impact of the currently loose diplomatic ties.
- Hong Kong might lose its special status and benefits that come with it.
The USD/HKD and the USD/CNY exchange rate were off to a weak bullish performance on Friday morning as the exchange rates approach the conclusion of a rather challenging week. It was challenging particularly for the Hong Kong Dollar and the Chinese Yuan due to the ongoing tensions between the U.S and China regarding Hong Kong’s autonomy.
Time : 17/07/2020
Pivot : 7.7528
Technical View : Long Above 7.7532
Target : 7.7539, 7.7546, 7.7558
Technical View : Short Below 7.7526
Target : 7.7514, 7.7499, 7.7486
The past few days have been characterized by significant volatility on both the USD/HKD and the USD/CNY due to the tensions regarding the Hong Kong security law that China recently passed. The legislation was viewed by the international community as an attempt by the Communist Party to exert more control over Hong Kong.
The law was seen as the mainland government’s attempt to violate Hong Kong’s freedom or autonomy. The U.S got involved and threatened to slap China with sanctions. Trump even made good on that threat by signing a legislation that aims to impose sanctions on anyone and or any business that works with the Chinese government to restrict Hong Kong’s Autonomy.
The implications of the ongoing tensions
The tensions will likely discourage investors and this may thus impact Hong Kong Dollar and The Chinese Yuan’s performance. Unfortunately, the situation is also worrying about Hong Kong’s relationship with the U.S. Trump is currently treating mainland China as a threat and that the business focus has shifted to Hong Kong.
The U.S is now treating Hong Kong the way it used to treat China as a business partner as per a statement made by President Trump. This means Hong Kong might lose some of the special privileges that it enjoyed courtesy of its special relationship with the U.S. In other words, tariffs exceptions and other benefits that Hong Kong used to enjoy might be lost. This will certainly cause a negative impact on the Hong Kong Dollar.