On Tuesday, the EUR/USD currency pair continued robust above 1.1100 handle. This tight range came on the heels of a very bullish gap which had happened during the Asian session. Exchange rate near the 1.1110 level, the trading reflected a careful optimism as market participants awaited the release of key US inflation data. This follows the pair’s losses of more than 2.5% in Tuesday’s selloff.
The recent fluctuations in the EUR/USD exchange rate are closely tied to trade developments between the United States and China. This dramatic escalation came just a month after unprecedented normalization of relations between the two countries. Now, a provisional trade truce has taken effect, set to last for 90 days. This truce is particularly noteworthy as it coincides with a rise in China’s economy, suggesting potential benefits for global trade dynamics.
Market participants are definitely focused on this US Consumer Price Index (CPI). They are hoping that it will be the shark-sized event that finally roils the market. Analysts are saying this data will in turn lead to the next cause powerfully mover in trading behavior. This last relationship between US inflation data and the EUR/USD exchange rate is particularly important. The abrupt increases in inflation can trigger shifts in monetary policy and stunningly affect trader sentiment.
Gold prices have been targeted. The precious metal successfully retained the $3,200 support level after rounding out a 3% drop seen on Monday. Gold sellers are getting some time off for good behavior. Today, traders are once again closely watching how new economic data might move the gold and currency markets.
Picture this though, the market is waiting anxiously for the next roll out of US inflation data. Given the current US-China trade war situation, this announcement will affect the EUR/USD currency pair exchange rate and can greatly affect trading strategy. The current state of market sentiment is cautiously optimistic. Nevertheless, the current trade negotiations and impending releases of economic data present risks to that outcome.