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Euro US Dollar Exchange Rate News: EUR/USD Plummets as Trade Uncertainty Fuels Demand for the US Dollar

EUR/USD Exchange Rate Weakened by Safe-Haven Demand

The Euro US Dollar (EUR/USD) exchange rate is on the back foot this morning, with the US Dollar coming out ahead amidst a surge in demand for safe-haven currencies.

At the time of writing the EUR/USD exchange rate is currently down almost 0.5% for far this morning, with the pairing having shed around half a cent from Monday’s closing level.

US Dollar (USD) Exchange Rates Strengthened by Ongoing Trade War Fears

The US Dollar (USD) is punching higher against the Euro and the majority of its other peers this morning as demand for the US currency is buoyed by concerns of escalating trade tensions between the US and China.

Donald Trump’s proposal to impose tariffs on a further $200bn worth of Chinese goods will come in to effect this month.

While China will be unable to respond with tit-for-tat measures given that it doesn’t even import $200bn worth of US goods, it make seek to respond by targeting US service instead, with markets fearing that this could set the two sides on a collision course for a full blown trade war.

Richard Falkenhall, senior currency strategist at SEB in Stockholm, said:

‘The dollar seems to be the main defensive currency of choice as trade war concerns have picked up this week and that is causing problems for emerging markets.’

Further weakening market risk appetite and fueling the US Dollar’s accent are the ongoing concerns surrounding both the Turkish Lira (TRY) and Argentine Peso (ARS).

This is prompting investors to shun emerging currencies, with the exodus translating into further demand for the US Dollar.

Better-Than-Expected Eurozone PPI Fails to Inspire Euro (EUR) Exchange Rates

Meanwhile the Euro (EUR) is struggling to advance this morning despite a stronger-than-expected reading from the Eurozone’s latest Producer Price Index.

According to data compiled by EU statistics agency, Eurostat, producer price growth continued to expand by 0.4% in July, beating forecasts that growth would slow to 0.3%, with the robust reading being driven by surging energy prices.

However this appears to have done little to aid the Euro this morning, especially in the face of the headwinds as a result of the soaring demand for the US Dollar.

EUR/USD Exchange Rate Forecast: Strong US Manufacturing PMI to Bolster the US Dollar?

Looking forward, the Euro US Dollar (EUR/USD) exchange rate could face further losses this afternoon with the publication of the ISM manufacturing PMI.

Economists forecast the index will should that the US manufacturing sector continued to expand at a robust pace in August, helping to get the US economy off to a strong start in the third quarter.

Meanwhile EUR investors are bracing for further weakness in the Euro on Wednesday as the Eurozone publishes its latest retail sales figures as analysts predict that sales growth will have contracted in July.