- As the US dollar increases the likelihood of elimination of escalations in the US-China trade war, the EUR/USD drops to near 1.1350.
- Beijing is considering suspending additional duties on some products from the US.
- ECB Holtzmann warns of the structural weakness of the eurozone economy.
EUR/USD During North American trading hours on Friday, trading will be at around 1.1350. The US dollar (USD) recovery moves will weaken major currency pairs in anticipation of improved trade relations between the US (US) and China.
US Dollar Index (DXY) will resume upside-down recovery on Friday after tracking the value of the greenback against six major currencies and correcting it to near 99.20 the day before. The USD index has risen to nearly 99.65, aiming to exceed the weekly high of around 100.00.
According to Bloomberg, the confidence of financial market participants has increased that the trade war between the world’s biggest powers could escalate as China shows it is considering suspending its 125% obligation on medical devices and some industrial chemicals imports.
This week, a dialogue from the White House expressed optimism that Washington and Beijing could make a deal, raising hope that the tariff war would not swirl further. On Tuesday, US President Donald Trump said “the discussion with Beijing is on track,” adding that he thinks “they will reach a deal.”
On the contrary, China has denied any debate with the US. “China and the US have not had any discussions or negotiations on tariffs,” a spokesman for the Chinese embassy said during North American trading hours, Reuters reported. He added that the US should “stop creating confusion.”
According to the Financial Age (FT), a Beijing spokesman said Thursday there were no “economic and trade negotiations” with the United States. He added that if the US wants trade consultations, it will need to “cancel all unilateral tariff measures completely.”
On the monetary policy front, the policymaker’s chorus shows that excessive uncertainty from the new economic policy of the US President could undermine the economy. Minneapolis Feeding President Neil Kashkari Bank warned Thursday that the uncertainty brought about by the president’s policies could lead to “business layoffs.” Kashkari ruled out the possibility that companies have begun cutting their labor force, but warned that some companies are showing that they are preparing for “possibility of employment cuts if uncertainty continues.”
Daily Digest Market Mover: EUR/USD weakens amid USD recovery
- Due to the strength of the USD, EUR/USD lowers the edge. The Euro (EUR) is opposed to its major peers except North American currencies on Friday, despite growing concerns that eurozone inflation could bear the central bank’s 2% target.
- On Thursday, ECB policymakers and governor of the Finland Central Bank, Olli Rehn, warned of the negative risks against inflation. “It is very likely that the forecast for medium-term inflation under current circumstances will be well below the 2% target,” Lane said on the sidelines at the International Monetary Fund (IMF) and World Bank’s spring meeting. Lane confidently stated that the current situation “justifies interest rate cuts in June.”
- During European trading hours, ECB policymakers and Austrian central bank governor Robert Holtzmann have expressed concern over the continent’s structural decay. Holtzmann expects fear of economic shock will remain intact despite tariffs that have been reduced by Donald Trump. “Even if tariffs drop, there are economic scars.” Holtzmann said. Such a scenario also paves the way for monetary policy easing.
- The next trigger for the euro is headlines about potential trade relations between the White House and the European Union’s (EU) sides of the Atlantic.
Technical Analysis: EUR/USD exceeds the major 20-week EMA
The EUR/USD will drop to near 1.1350 on Friday. but, Outlook The major currency pairs remain bullish as their 20-week index moving average (EMA) tilts around 1.0885.
The 14-week relative strength index (RSI) rises to an excess level above 70.00 each week chartthis shows strong bullish momentum, but cannot rule out some possible correction.
Looking up, a psychological level of 1.1500 is a great resistance for the pair. Conversely, the high of 1.1276 in July 2023 will be a key support for the Eurobulls.
US-China Trade War FAQ
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. That means creating trade barriers such as tariffs. This leads to anti-barrier, escalating import costs and thus causing cost of living.
The economic conflict between the US (US) and China began in early 2018 when President Donald Trump set a trade barrier in China, claiming unfair commercial practices and theft of intellectual property from Asian giants. China took retaliatory action and imposed tariffs on several US goods, including cars and soybeans. Tensions escalated until the two countries signed a US-China-1 trade agreement in January 2020. The agreement required structural reforms and other changes to China’s economic regime, pretending to restore stability and trust between the two countries. However, the coronavirus pandemic has focused on the conflict. But it is worth mentioning that President Joe Biden, who took office after President Trump, has put in place tariffs and even added taxes.
Donald Trump’s return to the White House as the 47th US president sparked a new wave of tension between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China after taking office on January 20, 2025. With Trump back, the US-China trade war aims to resume the US-China trade war to affect the mid-term abolition of the global economic landscape, especially as it is directly supplied to the global supply supply, to reduce investment.
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