Yesterday, the US dollar climbed toward its highs from April. This followed weaker-than-expected inflation numbers from the US, and the EUR/USD exchange rate saw gains this morning. I found myself considering whether this reaction was warranted. It seems there’s a continuing absence of inflationary pressure tied to US tariffs, and I tried to make sense of the data from the FRD perspective.
Therefore, the drawbacks of EUR/USD may remain limited
“The overall movement yesterday was quite noticeable. It seemed to overlook news about the US-China tariff agreement, which actually led to a cooler exchange rate. If the agreement turns out to be beneficial for the dollar, the risk of tension between these two economic giants should diminish.”
“Following a speech in London, one could argue that the agreement was already anticipated, and yesterday’s confirmation didn’t really add anything new. Yet, the dollar couldn’t capitalize on this optimistic outlook earlier in the week. This leads us to the conclusion that there’s a push to encourage trade in key goods.”
“It’s becoming more likely that other US trading partners won’t manage to secure the tariff concessions mentioned back in April before the end of the 90-day period. This assertion is gaining traction, and no matter the effort, the reaction patterns in the US dollar’s exchange rates continue to support it. Thus, while the downsides of EUR/USD may remain limited for now, there’s still plenty of uncertainty ahead.”
