U.S. Dollar Moves Higher Ahead Of Pelosi Visit To Taiwan

Key Insights

• Traders are focused on Pelosi visit to Taiwan. 
• China has previously warned against this visit, but it is not clear whether the country is ready for any serious moves. 
• In case there is no real escalation, the U.S. dollar may lose support. 

Nancy Pelosi Flies to Taiwan

U.S. dollar is gaining some ground ahead of the expected Pelosi visit to Taiwan. According to flightradar24, the plane carrying the U.S. House of Representatives Speaker Nancy Pelosi is scheduled to arrive at Taipei (TSA) at 14:43 GMT. Thus, traders should prepare for some volatility near this time.

It is not surprising to see that demand for the safe-haven U.S. dollar grows aheaad of the potential visit.

While the military escalation looks unlikely despite hawkish remarks from both the U.S. and China, traders expect that the visit will put additional pressure on the U.S. – China relations and could deal an additional blow to the economy.

The U.S. stock market is losing some ground ahead of the visit, but there is no panic. However, the situation may develop quickly, so traders must stay alert.

What Can Happen After The Visit?

It is not clear whether China is ready for a serious escalation over Taiwan. Markets are nervous, but the worst-case scenario, which implies military action, looks highly unlikely at this point.

In case China limits itself to verbal interventions and some economic sanctions on Taiwan, the optimism may quickly return to markets. This scenario will be bearish for the American currency as demand for safe-haven assets will decrease.

At the same time, anything that can be viewed as a real escalation between U.S. and China can trigger more buying in the U.S. dollar.

Traders should expect that political news will determine currency dynamics today. Economic news will probably have no impact as Pelosi visit is too important.

For a look at all of today’s economic events, check out our economic calendar.