EUR/USD Exchange Rate Edges Higher as US-China Trade Talks Boost Market Optimism in ‘Greenback’
The Euro US Dollar (EUR/USD) exchange rate is down by 0.4% today and is currently fluctuating around $1.132 on the interbank market.
The US Dollar (USD) rose against the Euro (EUR) following the printing of the US ISM Manufacturing PMI figures for Jun, which rose above the forecast 51.0 to 51.7.
These were followed by Markit Manufacturing PMI figures for June, which improved at 50.6.
Chris Williamson, a Chief Economist at Markit, remained cautious in his analysis, however, saying:
‘Although business optimism about the future lifted slightly higher, it remained close to survey lows to indicate persistent low morale. Worries centred on signs of slowing demand both at home and internationally, weaker sales, and geopolitical uncertainty.’
The G20 summit also provided some relief for US Dollar traders, with the US and China arriving at a tentative trade truce, with negotiations set to continue between the superpowers.
Han Tan, a Market Analyst at the trading broker FXTM, was sceptical, however, saying:
‘The path towards a lasting US-China trade deal remains unclear. The risk of talks falling apart, or another flare-up in tensions, could still rear its ugly head at some point in the future, blindsiding investors yet again.’
President Donald Trump’s last minute meeting with North Korean leader Kim Jong-un, however, eased global tensions.
This has also provided some uplift for the ‘Greenback’ in the short-term.
EUR/USD Exchange Rate Falls as EU Summit Discussions Breakdown
The Euro failed to claw back its losses against USD despite better-than-expected Eurozone unemployment rate figures for May, which exceeded the forecast 7.6% and eased to 7.5% – its lowest rate since 2008.
Bert Colijn, a Senior Economist for the financial services company ING, said:
‘With a decline of more than 100 thousand in May, unemployment shows the labour market is not losing steam at all, despite the soft patch that the Eurozone is currently in.’
The EU summit has remained in focus, with French President Emmanuel Macron saying that the summit had ended on ‘what we can call a failure’.
This follows a disagreement between Germany and France for determining the future European Commission president, which have raised concerns hat this could cause a split with populist governments in Poland and Italy.
Heightened political uncertainty within Europe, with the UK’s Brexit remaining in focus, has prevented the single currency from making any notable gains today.
EUR/USD Outlook: German Retail Sales in Focus
Euro traders will be looking ahead to tomorrow’s German retail sales figures for May, which are expected to improve from -0.2% to 0.5%.
Political developments will, however, remain in focus.
Any indications that US-China trade talks could collapse would lend the Euro – which is negatively-correlated with the US Dollar – some much-needed uplift.
The Euro US Dollar exchange rate could react conversely, however, and with any signs of a trade deal emerging from US-China trade talks we could see the USD safe-haven begin to weaken as traders flock to riskier assets.