EUR/USD Exchange Rate Fluctuates as Further US-China Tension Likely
The Euro US Dollar (EUR/USD) Exchange Rate is rangebound this morning, with the pairing currently trading at an inter-bank rate of $1.1366.
Meanwhile, US officials have confirmed they plan to pursue the extradition of Huawei’s Chief Financial Officer, Meng Wanzhou, despite the previous warnings from the Chinese Foreign Ministry spokeswoman that China ‘will take action in response’.
The US Department of Justice said in a statement:
‘We will continue to pursue the extradition of defendant Ms. Meng Wanzhou, and will meet all deadlines set by the US-Canada Extradition Treaty. We greatly appreciate Canada’s continuing support in our mutual efforts to enforce the rule of law.’
The case, which has led to rising diplomatic tensions between China and Canada, as well as the arrests of two Canadians in China, with another – a convicted drug smuggler – sentenced to death, could see tensions escalate between China and the US as the extradition is pursued.
Yesterday: Euro (EUR) Weakened by Poor Economic Sentiment
Yesterday saw the disappointing release of Germany’s ZEW Economic Sentiment Survey for January, which saw an unexpected increase from -15 to -17.5.
Following this release the Euro slid against the US Dollar, as the result showed that while investors remain pessimistic, they are not as pessimistic as before.
It was noted by ZEW President, Achim Wambach:
‘It is remarkable that the ZEW Economic Sentiment for Germany has not deteriorated further given the large number of global economic risks.’
US Dollar (USD) Slips on Reports of Cancelled US-China Trade Meeting
Yesterday afternoon December’s existing home sales figures were released, revealing a shocking fall of 6.4%, which likely did little to help the US Dollar stop the single currency from making gains.
Following a report in the Financial Times that stated the US had cancelled a trade meeting with Chinese officials the Euro strengthened against the US Dollar.
The report was later denied by White House advisor Larry Kudlow, who stated that besides the meeting scheduled for Chinese Vice Premier Liu He next week, ‘there was never a planned meeting.’
Prior to this, US President Donald Trump called for China to ‘finally do a Real Deal, and stop playing around!’
EUR/USD Outlook: Will a More Hawkish ECB Bolster the Single Currency?
The continuation of US-China trade tensions is also likely to cause the pairing to fluctuate, as further signs of increased tension will likely see investors return to the safe-haven US Dollar.
The European Central Bank (ECB) rate decision tomorrow will likely be uneventful, however if the central bank expresses a hawkish tone, we could see sentiment for the Euro increase.
Tomorrow will also see the release of January’s US initial and continuing jobless claims, with initial claims expected to increase, although continuing claims are forecast to drop to 1.735M. Demand for the US Dollar could increase if this figure follows or drops further than expectations.
The ‘Greenback’ could lose some steam if the forecasts for the Markit manufacturing and services PMIs are correct and both figures slide in January, which could see the single currency continue to make gains towards the end of this week’s session.
