FX markets contemplate US-EU trade deal – Commerzbank
|The trade deal between the US and the EU, announced on Sunday evening, was a major talking point in the markets yesterday, Commerzbank's FX analyst Michael Pfister notes.
US Dollar benefits from the likelihood of a decreased recession risk
"Opinions varied significantly. Some analysts emphasised that the EU had allowed itself to be taken advantage of and had not exploited its strengths effectively. Others argued that the deal reflected the EU's internal divisions and the balance of power in its relationship with the US, and was therefore the best possible outcome."
"The FX market made its view clear yesterday: EUR/USD fell by more than one and a half cents, dropping below 1.16 again. Roughly half of this was due to a stronger US dollar, and half to a weaker euro. This is consistent with my boss's arguments yesterday that the US dollar has benefited from the likelihood of a decreased recession risk. Conversely, the euro is probably suffering due to the imposition of tariffs of 15%, despite recent low expectations. This has brought the problems of the euro area back to the fore."
"It remains to be seen, though, whether the lower EUR/USD levels will last. Tomorrow's Fed meeting should demonstrate that political pressure from the US government is gradually having an effect, with several interest rate cuts likely to follow starting in September. By then, the US dollar should also have started to weaken again."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.