The EUR/USD currency pair remained under pressure during early Asian hours on Friday, sliding to below near 1.1380. All of this drop occurs against the backdrop of continuous and damaging trade uncertainty that is still profoundly affecting market conditions. Policy makers in the meantime, investors are still adjusting to the US-China trade war caused jitters. Consequently, the two fell and actually dipped under the psychologically important level of 1.1400.
The first two hours of trading showed that EUR/USD was sticking close to 1.1380, indicative of a trepidatious market tone. Peters and Portman’s travel is inextricably linked to the fate of U.S. trade relations on a global scale, especially U.S.-China relations. Continuing negotiations and future unknowns have investors on truce. This uncertainty is already impacting their trading strategies and bullish/bearish position on the euro versus the dollar.
Market analysts note a longer-term trend in which the euro has recently been weakening against the dollar. Nonetheless, they see potential downside for EUR/USD as limited. Investors continue to fret about how trade tensions are affecting economic stability. As such, they are balanced on this uncertainty with other more positive leading economic indicators to be released later in the same day.
As the final reading of Michigan Consumer Sentiment comes up quickly, it’s scheduled to be released later on Friday, and it should prove to be a major watershed event. This data could provide further insights into consumer confidence in the United States, potentially influencing market perceptions and currency valuations.
After all, the Michigan Consumer Sentiment index is one of the seminal, leading indicators of consumer-preparedness to embrace or recoil from the dynamic connected economy. A much stronger than expected reading would likely give the dollar a jolt. Conversely, a disappointing outcome would present a substantial reprieve for the euro. Traders are especially attuned to shifts in consumer sentiment. These changes may create macroeconomic effects that move exchange rates.
As the day continues on, we’ll have to see how all of these factors shake out in the forex market. Additionally, trade uncertainty and consumer sentiment often go hand-in-hand. We expect these to be the dominant drivers of trading in the EUR/USD and other currency pairs.