EUR/USD Muted as US Trade Concerns Build
The Euro US Dollar (EUR/USD) exchange rate remained subdued this afternoon as rising trade fears continue to unwind some of the US Dollar’s recent gains.
At the time of writing EUR/USD is trending close to its opening levels this afternoon, with the pairing currently on target for its fifth consecutive quarter of gains.
US Dollar (USD) Weakens over Trade Fears
The US Dollar is on the back foot against the Euro today as markets reacted to the latest development in the US trade spat with China.
Hot on the heels of last week’s announcement that Trump’s administration would impose tariffs on up to $60bn worth of Chinese imports, reports suggest that Trump is gearing up to crackdown on Chinese investment in the US.
Bloomberg reports that the US wishes to restrict Chinese investment in technologies that the US government deems sensitive, such as 5G wireless communications and semiconductors.
It is suggested that Trump may even invoke the International Emergency Economic Powers Act in order to implement the restriction.
The reports have led to reignited fears over the possibility of a US-China trade war and come as a stark warning to investors who were optimistic that trade tensions were easing.
Krishna Memani, chief investment officer at OppenheimerFunds Inc said;
‘The trade issue and uncertainty related to that is not going to fade in one day because all of a sudden we started thinking that we would reach some sort of a settlement with China.
This is going to be somewhat of a long process for things to settle down.’
Euro (EUR) Strengthened by Upbeat Eurozone Growth Forecasts
Meanwhile the Euro has been buoyed today by an upbeat Eurozone report published by S&P Global Ratings.
In a note to clients the agency suggests that the Eurozone is likely to continue to enjoy robust growth for the foreseeable future thanks to a pick-up in global trade.
However at the same time analysts at S&P Global Ratings forecasts also conclude that the bloc’s growth is likely to have peaked in 2017, and that expansion over the next couple of years will be more modest.
The S&P Global Ratings report read;
‘Strong fundamentals in the eurozone suggest that economic expansion will continue at a brisk pace, and we have raised our GDP growth forecasts for the region to 2.3% this year and 1.9% in 2019.
However, the general fall in sentiment surveys at the start of 2018 indicates that Eurozone growth is levelling off.’
EUR/USD Forecast: German Employment Data to Bolster the Euro?
Looking ahead the EUR/USD exchange rate may push higher on Thursday with the release of Germany’s employment figures tomorrow morning.
Analysts forecast that Thursday data will show that German’s unemployment rate continued to fall this month, likely helping to lift the Euro.
These gains may be further extended with the publication of Germany’s Consumer Price Index in the afternoon as inflation is expected to have surged from 1.4% to 1.7% in March, striking its highest levels since December.
However any potential gains for EUR/USD could be undermined by the release of the latest US GDP figures.