US-China power struggle will probably be the biggest market event of the century, strategist says

The battle between China and the United States to be the world's most powerful nation could be the century's defining moment for financial markets, according to one strategist.

Market players on Tuesday were digesting news of an accord between North Korea and the United States, which aims to work toward complete denuclearization and a lasting "peace regime" on the Korean Peninsula. The historic agreement is being scrutinized by analysts and traders to understand what this moment means to the world and financial markets. But according to Jane Foley, the head of foreign exchange strategy at Rabobank, the wider picture should include China's relationship with the U.S.

"I think it's been very clear we've had this power struggle or are in the midst perhaps of a power struggle between the U.S. and China, played out, of course, through trade," Foley told CNBC's "Squawk Box Europe."

"We've previously understood that perhaps China have liked North Korea to be in place as a sort of a buffer between itself and the West, what does this (Tuesday's agreement) mean going forward?," Foley wondered. "This power struggle … is perhaps the biggest event for the markets really, of the decade, maybe, probably of the century," she added.

Over the past few months, the U.S. has imposed new tariffs on Chinese products in an attempt to reduce its trade deficit with the country. China has prepared retaliatory measures but both countries have been holding diplomatic talks to try to reach a compromise over their trade links.

China has been a long-standing ally of North Korea and is an important trading partner and a major source of food and energy. "(China) has helped sustain Kim Jong Un's regime, and has historically opposed harsh international sanctions on North Korea in the hope of avoiding regime collapse and a refugee influx across their 870-mile border," the Council on Foreign Relations, a think tank, argued in an article earlier this year. As the relationship between the U.S. and North Korea gets closer, China could feel threatened and potentially change its attitude toward the U.S.

"I think our whole relationship with North Korea and the Korean Peninsula is going to be a very much different situation than it has in the past. We both want to do something, we both are going to do something, and we have developed a very special bond," President Donald Trump said at the signing ceremony Tuesday.