EUR/USD heads lower on US Dollar strength as trade tensions ease
- The Euro extends losses below 1.1630 as the US Dollar firms up amid easing trade fears.
- Trump affirmed that he is expecting to sign a "fair deal" with Xi Jinping next week.
- The White House's economic advisor boosted sentiment further, anticipating the end of the US shutdown.
EUR/USD moves lower for the third consecutive day on Tuesday, trading at the 1.1615 area at the time of writing, after having peaked at 1.1728 on Friday. Hopes that the meeting between US President Donald Trump and Chinese Premier Xi Jinping will help to de-escalate trade tensions and avert 100% tariffs on China have sent the US Dollar rallying across the board.
Trump soothed investors on Monday with a conciliatory tone towards China. The US President announced that he will meet Xi Jinping in South Korea next week to "discuss multiple issues," but he said that he expects to reach a fair trade deal with Beijing and that the US will have a very good relationship with the Asian country.
Furthermore, the White House economic advisor, Kevin Hassett, also affirmed on Monday that the US federal government shutdown is likely to end "sometime this week". That would provide the necessary data for the Federal Reserve's (Fed) monetary policy committee, which meets next week and is highly likely to cut interest rates by 25 basis points.
In the economic docket, a speech by Fed Governor Christopher Waller and another one by European Central Bank (ECB) council member Martin Kocher will provide the fundamental background, but they are unlikely to say anything new on their respective central bank's monetary policies.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.24% | 0.22% | 0.58% | 0.18% | 0.46% | 0.52% | 0.15% | |
| EUR | -0.24% | -0.02% | 0.33% | -0.06% | 0.23% | 0.28% | -0.09% | |
| GBP | -0.22% | 0.02% | 0.34% | -0.04% | 0.25% | 0.29% | -0.07% | |
| JPY | -0.58% | -0.33% | -0.34% | -0.39% | -0.11% | -0.06% | -0.40% | |
| CAD | -0.18% | 0.06% | 0.04% | 0.39% | 0.28% | 0.34% | -0.02% | |
| AUD | -0.46% | -0.23% | -0.25% | 0.11% | -0.28% | 0.05% | -0.33% | |
| NZD | -0.52% | -0.28% | -0.29% | 0.06% | -0.34% | -0.05% | -0.37% | |
| CHF | -0.15% | 0.09% | 0.07% | 0.40% | 0.02% | 0.33% | 0.37% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: The US Dollar appreciates on easing trade fears
- The latest episode of the trade rift between the US and China is ebbing. Trump and Xi meet next week to find a deal that guarantees a further extension of the trade truce beyond the November 1 deadline and avert Trump's threat of 100% tariffs on Chinese exports that would disrupt global trade. The US Dollar has reacted positively to the news.
- Market volatility, however, remains subdued amid the lack of macroeconomic data. Investors are bidding their time this week, awaiting key developments next week, namely the outcome of the Federal Reserve's monetary policy meeting and the meeting between Trump and Xi in South Korea.
- In the Eurozone, the victory of French Prime Minister Sebastién Lecornu in last week's no-confidence votes provided some support to the Euro. Investors, however, are aware of the fragility of the government and the serious challenge of having to pass a tightening budget through a deeply divided parliament. This is likely to keep Euro strength limited.
- Macroeconomic data released by Destatis on Monday revealed that the German Producer Price Index (PPI) edged 0.1% down in September, against market expectations of a 0.1% increase. These figures follow declines of 0.5% and 0.1% in August and July, respectively. Year-on-year, the PPI fell 1.7%, following a 2.2% contraction in August.
Technical Analysis: EUR/USD returned within the channel, aiming for 1.1600
EUR/USD broke below the reverse trendline at the 1.1640 area, returning to the broken bearish channel, after the rejection at 1.1730 last week, and increasing pressure towards the 1.1600 area. On the 4-hour chart, the Relative Strength Index (RSI) has breached the 50 level, and the Moving Average Convergence Divergence is heading south below the signal line, highlighting the negative momentum.
The immediate bearish target is the October 15 low, near 1.1600. Further down, the October 9 and 14 lows in the area of 1.1545 would come into focus ahead of the channel bottom, now around 1.1470. On the upside, Monday´s highs are at 1.1675, well below Friday's high, near 1.1730. The pair would need to break those levels to ease bearish pressure and shift the focus to the October 1 high, around 1.1775.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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