Euro sinks on US-UK trade deal and could lose more ground on further trade deals
|EUR: The common currency sank back towards the $1.12 level yesterday, as investors viewed the US-UK trade agreement as a bullish development for risk assets and the dollar. Since Liberation Day, the euro has been viewed as a de facto safe haven currency, alongside the yen and the franc, so it stands to lose ground should we see signs of further progress towards trade deals and a gradual lowering in average tariff rates. Any headlines out of this weekend’s talks between the US and China, which will take place in neutral territory in Switzerland on Saturday could, therefore, be highly important for the euro.
As has been the case for a few weeks, EUR/USD is being driven almost entirely by developments out of the US, particularly given that domestic economic news has been rather light. Wednesday’s retail sales report was a touch on the soft side (-0.1% MoM), although this was of little importance for markets. An upward revision to the April composite PMI (to 50.4 from 50.1) is welcome, but with tariff uncertainties still looming large, the near-term growth outlook remains far from devoid of risk.
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