EUR/USD Recovers As Investors See Limited US-China Trade War
EUR/USD bounced back from an intraday low of 1.0270 and rebounded to near 1.0350 in the European session on Tuesday (4/2). The major currency pair gained interest from buyers as US President Donald Trump’s decision to suspend tariffs on Canada and Mexico has reduced the appeal of the US Dollar (USD) as a safe-haven currency.
The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, surrendered its intraday gains and was trading at 108.44 at the time of writing, right on track to hit Monday’s low of 108.40.
US President Trump suspended the imposition of tariffs on his North American partners after they agreed to work together to stop the flow of fentanyl. On the other hand, the president’s proposal to impose a 10% tariff on China is still on the table, and moreover, he has even suggested going further. "China will hopefully stop sending us fentanyl, and if they don't, the tariffs will be much higher," Trump said.
Meanwhile, China has responded quickly to Trump's tariffs by imposing higher tariffs of 15% on Coal and Liquefied Natural Gas (LNG), and 10% on Crude Oil, farm equipment, and some cars.
Such a scenario suggests that the trade war will not spread to the rest of the world and will remain between the US and China, which has weighed on demand for safe-haven assets.
On the economic front, the US Dollar will be guided by a series of economic indicators related to the labor market this week, such as the JOLTS Job Openings Data, ADP Employment Change and Nonfarm Payrolls (NFP), and the US ISM Services PMI figures.
The labor market data will influence market speculation about the Federal Reserve's (Fed) monetary policy outlook throughout the year. Currently, the Fed is in a wait-and-see mode until it sees "real progress in inflation or at least some weakness in the labor market." (Newsmaker)
Source: FXstreet
