The Euro (EUR) fluctuated against the US Dollar (USD) during Thursday’s trading session as markets became increasingly skittish ahead of a meeting between US president Donald Trump and his Chinese counterpart Xi Jinping.
Euro US Dollar (EUR USD) Unsettled by US-China Talks
The Euro US Dollar exchange rate experienced volatility as markets were spooked ahead of Trump’s first face-to-face meeting with Xi later today.
While he has toned down his rhetoric since taking office in January, Trump was previously highly critical of the Chinese government, branding them ‘currency manipulators’ and vowing to slap punitive tariffs on Chinese goods imported to the US in order to balance the trade gap between the two countries.
Investors fear that Trump’s administration could still seek to impose some sort of restrictions on its trade partnership with China however after the US commerce secretary Wilbur Ross warned that the US could take tougher measures against China as he argued that the two sides are already in a trade war in
an interview with CNBC last week
;
‘We are in a trade war. We have been for decades. The only difference is that our troops are finally coming to the rampart. We didn’t end up with a trade deficit accidentally.’
While analysts believe that the Chinese President may diffuse the situation by promising to pump more investment into the US, should the talks end acrimoniously markets worry that Trump will return to his more antagonistic approach to China, the fallout of which may be felt across the global economy.
Single Currency Weakened by Draghi Comments
Meanwhile, the Euro suffered this morning following a speech by European Central Bank (ECB) President Mario Draghi as he said it was still too soon for the Bank to begin discussing tightening monetary policy.
Speaking at an ECB conference in Frankfurt, Draghi said that while economic indicators suggested that the Eurozone was showing robust growth it would need further signs that the inflation rate was stabilising at the bank’s target of 2% before it could alter its current stance.
This stance was reinforced by ECB policy maker Peter Praet who suggested that the ECB’s ultra-loose interest rates were likely to remain in place long after its quantitative easing programme comes to an end in December, saying;
‘In our expectation, the policy interest rate will remain at present or lower levels for an extended period of time and well past the horizon of our net asset purchases.’
The remarks were disappointing to EUR investors, many of whom had speculated that the Bank could begin to raise interest rates at the end of the year after an unusually hawkish statement from Draghi following last month’s ECB policy meeting
EUR USD Forecast: US Non-Farm Payrolls Ahead
The EUR USD exchange rate may push higher on Friday as analysts predict that the latest Non-farm Payroll figures will show that the US economy created around 50,000 fewer jobs in March compared to the month before.
Meanwhile the Euro may also be bolstered by the release of Germany’s latest Trade Balance, with economists forecasting that the country’s trade surplus will rebound in February following an unexpected drop at the start of the year.