The euro (EUR) declined against the US dollar (USD) on Friday, breaking a three-day rise. As of now, EUR/USD is around 1.1663, sliding down from a two-week peak earlier that day.
On the flip side, the US Dollar Index (DXY), which measures the dollar’s performance against a selection of six major currencies, rebounded from several days of lower value, currently sitting at approximately 98.50, as market risk sentiment steadies.
President Trump indicated that the proposed 100% tariffs on Chinese imports are “unsustainable.” He noted that this decision is a reaction to China’s tighter controls on rare earth exports. He also mentioned plans to meet with Chinese President Xi Jinping within the next couple of weeks, a statement that seemed to alleviate some investor concerns about a broader trade war. Adding to that, WTO Director-General Ngozi Okonjo-Iweala encouraged both nations to ease tensions, cautioning that extended conflicts could diminish global GDP by nearly 7% in the long run.
While the dollar experiences a short-term recovery, this positive trend may diminish due to potential new disruptions in the regional banking sector, which add layers of uncertainty to the U.S. economic landscape. Concurrently, traders are anticipating consecutive 25 basis point rate cuts from the Federal Reserve during their October and December meetings, as indicated by the CME FedWatch tool. The ongoing U.S. government shutdown, now in its third week, continues to impact sentiment and raises issues regarding overall financial stability.
Within the eurozone, there was some stabilizing of sentiment on Thursday after French Prime Minister Sébastien Lecornu narrowly avoided a second no-confidence vote, reducing immediate political concerns in the eurozone’s second-largest economy.
Earlier, eurozone inflation data generally matched expectations, revealing minimal shifts in price pressures. Core HICP for September rose by 0.1% month-on-month and 2.4% year-on-year, slightly above the anticipated 2.3%. The overall HICP also increased by 0.1% month-on-month, matching expectations and remaining in line with August’s figures.
Meanwhile, European Central Bank (ECB) officials kept a cautious stance on Friday. ECB President Slijpen remarked that the economy appears more robust than anticipated, but that just because the current policy is “in good shape” doesn’t guarantee its future stability. Similarly, ECB President Nagel remarked that there was no immediate need to adjust interest rates.
