EUR/USD Exchange Rate Muted as US-China Trade Deal under Threat
The Euro to US Dollar (EUR/USD) exchange rate is stuck trading in a narrow range this morning as US-China tensions threaten to derail a tentative trade deal between the two powers.
At the time of writing EUR/USD exchange rate is trading at around $1.1026, virtually unchanged from this morning’s opening rate.
US Dollar (USD) Muted amid Fresh US-China Trade Anxiety
The US Dollar (USD) is struggling to find momentum this morning as flaring tensions between the US and China are threating to derail trade talks.
This comes just days after the two sides agreed to a tentative ‘phase 1’ trade deal, hailed by Donald Trump as ‘one of the biggest deals that’s been made in a long time, with China.’
The renewed tensions come after the US House of Representatives passed a bill backing Hong Kong protestors. The bill will see the US revoke Hong Kong’s special trading status unless human rights in the city are respected.
U.S. House takes hard line on China over Hong Kong, Huawei https://t.co/UtMpcveOpT
— Reuters China (@ReutersChina) October 16, 2019
Ipek Ozkardeskaya, senior market analyst at London Capital Group, commented:
‘Tensions with China started rising again amid the US House passed a bill on Hong Kong. Needless to say that Beijing didn’t like the US sticking its nose into its internal affairs at all, and threatened to retaliate.
‘As such, the optimism regarding a possible trade deal between the US and China has been shot down within a couple of days after the Washington negotiations. It looks like trouble is brewing again on the US-China trade front.’
This is putting pressure on the US Dollar this morning as the US-China trade war has been blamed for the recent slowdown in US economic data, and has forced the Federal Reserve to cutting interest rates in recent months.
Euro (EUR) Flat as Eurozone Inflation Weaker-than-Expected
Meanwhile, the Euro (EUR) is also on the back foot this morning as the Eurozone’s final consumer price index came in below expectations in September.
According to data published by the European Statistics Agency, headline inflation fell from 1% to 0.8% last month, down from a preliminary suggesting a more modest slide to 0.9%.
This was the slowest pace of inflation since November 2016, and is likely keep pressure on the European Central Bank (ECB) to continue easing its monetary policy.
EUR/USD Exchange Rate Forecast: US Retail Sales to Weigh on the US Dollar?
Looking ahead, the Euro to US Dollar (EUR/USD) exchange rate may edge out some gains later this afternoon with the publication of the latest US retail sales data.
Today’s figures are expected to show that sales growth slowed to seven-month low in September.
Robust consumer spending has been one of the few positives buoying the US economy in recent months, so signs that it may be beginning to taper off is likely to limit the appeal of the US Dollar.
Meanwhile, the direction of Brexit talks over the next 24 hours is likely to be a key focus for EUR investors, with the Euro potentially strengthening the closer the UK and EU get to a deal.