EUR/USD experienced a notable upswing last week, demonstrating a broadly positive trend. The currency pair extended its robust recovery trajectory, momentarily surpassing the 1.0900 mark to achieve multi-month highs. This rally, although losing some steam as the week progressed, concluded with a solid performance on the weekly chart, underscoring the resilience of the euro against a backdrop of economic changes. The recent uptick in the pair has been substantially driven by a weaker US Dollar, highlighting the shifting dynamics in global currency markets.
The backdrop to this currency movement includes significant economic developments in China. The Chinese government announced targeted plans aimed at boosting domestic consumption and increasing household incomes. These measures are expected to influence global trade dynamics, potentially affecting currency valuations and international market trends. Meanwhile, in the United States, the trade deficit remains a point of economic discussion. The US trade deficit has persisted since 1975, with the percentage relative to GDP showing no significant rise over the past 15 years.
The US trade deficit is currently around 8 percent of GDP, aligning with percentages observed during the prosperous decade preceding the COVID-19 pandemic. This rate remains markedly lower than the historical peak of approximately 14 percent recorded during George W. Bush's presidency. The trade deficit is calculated as the difference between imports and exports of goods and services, reflecting the country's trading position with international partners.
In the context of US exports, the farm and energy sectors play a crucial role, accounting for about half of all exports. These sectors benefit from substantial government subsidies, which support their competitiveness on the global stage. Despite this support, the trade deficit continues to be a consistent feature of the US economic landscape.
The performance of the EUR/USD currency pair last week illustrates broader economic trends, influenced by both domestic policies and international developments. The weakening of the US Dollar has been a key factor in the euro's gains, providing momentum for its rise. Additionally, China's strategic economic plans introduce new variables into the global economic equation, potentially affecting future trade balances and currency valuations.