EUR/USD has stabilized after an almost 0.5% increase in the previous session, currently trading near 1.1620 during the Asian hours on Monday. However, the US dollar might strengthen further as trade tensions between the US and China continue to escalate. The dollar could keep facing challenges due to the ongoing US government shutdown.
President Trump indicated on Friday that there was no need for a meeting with Chinese President Xi Jinping at their upcoming summit in South Korea. He also revealed plans to implement 100% tariffs on Chinese imports. In retaliation, China has warned of countermeasures if these tariffs aren’t reversed, raising concerns about the implications for the US economy amidst this trade war.
The inaugural federal paychecks for October were due to be issued on Friday but have been delayed due to the shutdown. This disruption is expected to persist at least through Tuesday, coinciding with the Columbus Day holiday on Monday, and a resolution for the shutdown is still elusive.
The EUR/USD pair is benefiting as the euro gains ground, supported by diminishing political tensions in France. President Emmanuel Macron is poised to appoint a new prime minister following Sebastien L’Ecornu’s resignation. Investor sentiment improved as Mr. Lecorne suggested that a snap general election was unlikely due to the parliament’s dissolution.
According to the European Central Bank’s September Governing Council report, there was general consensus among policymakers that the current policy stance aligns with a medium-term inflation target of 2%. They agreed that current interest rates are adequately robust to tackle potential shocks in light of two-sided inflation risks.
