In European trading on Thursday, EUR/USD dipped below the 1.1300 level. The large uptick in demand for the US Dollar caused this drop. The currency pair has fallen as a result of adverse market conditions. This decrease is largely attributable to the promises of big trade deals from America, notably US-China and US-UK deals.
Further aggravating the squeeze is the US Dollar’s recent record strength, which has pushed EUR/USD even further down. Market sentiment changed towards the positive side on the prospect of future trade deals. Congestion-busting deals Investors are hopeful that these deals to reduce congestion will invigorate the US economy. In the wake of the fallout, sentiment towards the US Dollar has turned positive. This optimism is particularly notable ahead of a news conference scheduled for 14:00 GMT in Washington, where former President Donald Trump is expected to announce a trade deal agreement with the UK.
And as the market looks forward to the timing of Trump’s speech, risk sentiment has been recovering nicely. A technical agreement on the trade deal is anticipated in the coming days. This anticipation has driven up demand for the US Dollar, creating a corresponding downward pressure on the EUR/USD exchange rate. This is an important new step. All this happens just as the EUR/USD is doubting its own ability to maintain value in an environment of rising demand for US Dollar.
Concurrently, gold prices have responded to these market dynamics as well. On Thursday afternoon, gold prices were only moving marginally higher, after clawing back from their session lows to trade at about $3,343. Gold has built upon yesterday’s correction, down under 1%. Gold prices have fallen as investor sentiment turns. Now investors are turning back to riskier assets on optimism of trade agreements.
Since the demand for the US Dollar drives the EUR/USD exchange rate, the inverse is true. This relationship further illustrates just how inescapably connected currency movements are to geopolitical developments and economic policymaking. That buzz about Trump’s big announcement to come just highlights the extent to which trade relations are dominating market direction.