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Euro US Dollar (EUR/USD) Exchange Rate Rises as Bloc Secures Tariff Exemption

Euro (EUR) Exchange Rates Supported by Temporary US Tariff Exemption on Steel and Aluminium

The Euro US Dollar (EUR/USD) exchange rate inched higher on Friday, capitalising on news that US President Donald Trump has granted the EU exemption from looming tariffs on steel and aluminium.

Trade Representative Robert Lighthizer told a Senate panel that the US President had decided to pause the import duties whilst further discussions take place, putting the EU alongside Argentina, Australia, Brazil, Canada, Mexico and South Korea as exempt nations.

Speaking to the Senate Finance Committee, he stated:

‘The idea that the President has is that, based on a certain set of criteria, some countries should be out’. What he has decided to do is pause the implementation of the tariffs in respect to those countries’.

This is great news for the bloc, with markets having been concerned that the EU would not successfully negotiate exemption in time for today’s enactment deadline.

EU Council Leader Donald Tusk and UK Prime Minister Theresa May have both welcomed the news, but both leaders have called for the tariffs to be made permanent.

This news ultimately gave the Euro (EUR) a little boost, with today’s rather sparse data calendar leaving the market focus on the current trade actions of the US.

US Dollar (USD) Exchange Rates Limited by China Tariff Concerns

The US Dollar (USD) continued to encounter turbulence today with markets anxious upon hearing that the US has proposed tariffs targeting up to $60bn in Chinese imports, the first of many measures according to reports.

The White House has argued that these actions are necessary in counteracting China’s extensive range of unfair trade practices, with intellectual property theft, Chinese tariffs of their own and China’s substantial trade surplus against the US all being primary concerns.

China has been quick to respond, however, threatening tariffs on America’s agricultural sector that would target items such as pork, wine and beans, amongst many.

Beijing has also pushed for talks, however, asking the US to negotiate a settlement and ‘pull back from the brink’, efforts that seem to illustrate a willingness to avoid a direct trade war with the US.

Nonetheless, the possibility of escalations from China are huge, with markets concerned that both the global economy and the US economy could suffer.

This outlook quickly curbed demand for the ‘Greenback’, allowing the Euro to capitalise despite rising risk aversion amongst the markets.

Euro US Dollar (EUR/USD) Exchange Rate Forecast: US GDP in the Week Ahead

The Euro US Dollar (EUR/USD) exchange rate could encounter volatility next week depending on how markets react to the latest US gross domestic product (GDP) release, and the US advance goods trade balance, both scheduled for Wednesday.

Recent news that the US Federal Reserve is hawkish on the state of the US economy may have taken a back seat to trade war fears, but optimism for economic expansion in the US is still bubbling beneath the surface and liable to rise on further upbeat data releases.

It should be stressed, however, that markets currently expect the final quarter-on-quarter GDP estimate for 2017 to fall to 2.6%, down from the previous score of 3.2%.

If this occurs then the US Dollar could see an extended downturn, particularly with trade concerns liable to continue into the Easter weekend.