The EUR/USD exchange rate is on a winning streak, and it's all thanks to the growing trade concerns that are weighing on the US Dollar. As investors watch the escalating tensions between the US and China, and the ongoing US government shutdown, confidence in the Dollar is taking a hit.
President Trump's attempts to calm markets on Wednesday fell short, as he confirmed that the trade war with China is already underway. However, his Treasury Secretary, Scott Bessent, tried to soften the blow by suggesting that an extension of the trade truce is still a possibility.
The Federal Reserve's Beige Book, released on Wednesday, echoed Chairman Powell's previous comments, highlighting the slow job growth due to trade tariffs. This report strengthens the case for further interest rate cuts and puts more pressure on the US Dollar.
But here's where it gets controversial... The Euro is gaining strength, but will it last? The Eurozone's Trade Balance and ECB President Lagarde's speech could provide some fundamental insights. Meanwhile, in the US, the Philadelphia Fed Manufacturing Survey will be a key indicator to watch, along with speeches from Fed policymakers.
The Euro's performance today is impressive, especially against the Australian Dollar. The heat map shows the percentage changes, with the Euro gaining ground across the board.
And this is the part most people miss... The mounting US-China trade tensions are keeping the Dollar on the back foot. Investors are hoping for a resolution at next week's meeting between Trump and Xi Jinping, but until then, the Greenback may remain vulnerable.
The Federal Reserve's assessment on Wednesday showed a resilient US economy, but consumer spending is down. Employment demand is muted, and import costs are rising, creating economic uncertainty.
Eurostat's data reveals a contraction in the Eurozone's Industrial Production, but the impact on the Euro is minimal due to better-than-expected figures.
Technical Analysis: EUR/USD is testing its limits, with bulls aiming for the channel top at 1.1670. A break above this level could signal a trend shift, but it's a tough challenge. The next resistance levels are at 1.1730 and 1.1780, but these seem ambitious for today.
Support levels are at 1.1630 and 1.1600, and a move below these could bring the lows of October back into play.
FAQs: What's a trade war? It's an economic conflict caused by extreme protectionism, resulting in tariffs and counter-tariffs, which increase import costs and the cost of living.
The US-China trade war began in 2018, with Trump imposing trade barriers on China. China retaliated, and tensions escalated until the Phase One trade deal in 2020. The Coronavirus pandemic took the spotlight away, but Biden continued with tariffs.
Now, with Trump back in the White House, the trade war is set to resume, with policies that could disrupt global supply chains and reduce spending, impacting the Consumer Price Index inflation.
