EUR/USD Exchange Rate Muted on US-China Trade Scepticism
The Euro to US Dollar (EUR/USD) exchange rate is holding in a narrow range this morning as markets continue to digest the phase one trade deal signed between the US and China on Wednesday.
At the time of writing EUR/USD exchange rate is trading at around $1.1154, just shy of a one-week high.
US Dollar (USD) Stalls amidst US-China Trade Deal Doubts
The US Dollar (USD) is struggling to find support this morning after markets appeared to express disappointment over the US-China phase one trade deal.
US and China sign 'phase one' deal https://t.co/FM6xDsTW1x
— BBC Business (@BBCBusiness) January 15, 2020
Analysts finally got their hands on the full text of the deal following its signing by US President Donald Trump and Chinese Vice-Premier Liu He in Washington yesterday.
The deal mostly focuses on a pledge by China to buy an additional $200bn worth of US goods over the next two years and should prevent the US placing anymore tariffs on Chinese goods.
While markets welcomed the signing of phase one as a notable easing of tensions between the two powers, analysts didn’t quite buy into Trump’s claim of it being ‘momentous’ and the ‘biggest deal ever’.
In fact many expressed disappointment that it didn’t cover any of the key issues which triggered the trade war in the first place, nor does it indicate any timeline for the lifting of existing tariffs.
Tim Drayson, Head of Economics at Legal & General Investment Management (LGIM) comments:
‘While this [deal] could hold through to November, it probably marks the peak in improving news on the US and China relationship.
‘First, the majority of the existing tariffs remain in place, with no timetable for their removal. Second, it will be difficult for China to meet its target for purchases of US goods.
‘Third, the deal lacks a credible enforcement mechanism. Finally, progress on the key structural issues remain extremely limited.’
Euro (EUR) Steady as ECB in Focus
Meanwhile, the Euro (EUR) is mostly rangebound this morning as markets await the publication of the European Central Bank (ECB) minutes from its December policy meeting.
EUR investors will be keeping a close eye on the minutes as they seek to gauge the mood of policy members and whether they believe the outlook for the Eurozone is likely to improve in 2020.
Danske Bank analysts suggest:
‘The meeting did not reveal new policy signals, but the potential for governing council members viewing the economic outlook more positively is worth keeping an eye on. For the longer term, we will look for clues about the strategic review.’
The ECB will remain in focus through to the evening with a speech by ECB President Christine Lagarde.
Markets will be hoping that Lagarde may discuss the bank’s upcoming strategic review and what she hopes it will achieve.
EUR/USD Exchange Rate Forecast: Rising US Retail Sales to Provide a Bump to the US Dollar?
Also on the docket today is the publication of the latest US retail sales figures, which may weigh on the Euro US Dollar (EUR/USD) exchange rate later this afternoon.
Economists are forecasting a modest acceleration of sales growth in December, likely bolstering the appeal of the ‘Greenback’.
Lending further support to the US Dollar may also be the release of the Philadelphia Fed Manufacturing Index, which is expected to show a bump in factory activity in January.
Still to come for EUR investors this week is the final release of the Eurozone’s consumer price index (CPI) on Friday.
December’s final CPI reading may provide some lift to the Euro as it is expected to confirm Eurozone inflation ticked up from 1% to 1.3%, a six-month high.