The EUR/USD currency pair weakened during the early Asian session on Friday, trading near 1.1380. This drop breaks under the important psychological level of 1.1400. These uncertain trade conditions are catalyzing this shift and souring overall market sentiment. Investors are becoming more risk-averse. They are looking ahead to the final reading of Michigan Consumer Sentiment, due out later on Friday.
As the European trading day kicked off, EUR/USD began moving lower. This change is in response to mounting worries regarding the state of trade relations between the US and China. The fierce and ongoing controversy that has accompanied trade negotiations of late has only added to this uncertainty, fueling the pair’s volatile swings as of late. Market participants have one eye on the State visit developments, with any news likely to move currency given it will greatly affect currency valuations.
As things stand, EUR/USD has been very quiet just above the 1.1380 mark, a good reflection on the nervous mood among traders at this time. Political fragmentation is back. The euro is still in free fall against the dollar. This reflects the fact that investors continue to be worried about the economic repercussions of the US-China trade wars. It seems that the near-term negative for EUR/USD won’t do much. Next, all eyes will be on ongoing trade negotiations for possible market-moving updates.
Besides the strength of EUR/USD, we see the AUD/USD pair consolidating around 0.6400. Down Under, the Australian dollar is staying strong! It is holding pretty close to its year-to-date high, despite an Australian bank holiday. The stability of AUD/USD reflects a regional market dynamic that is quite different from that impacting EUR/USD.
Trade uncertainty is one of the main and pressing factors affecting currency markets across the world. Traders have been scrutinizing the effect of US-China relations. A good number more are shifting their positions and deciding to play a wait-and-see game. This focus on ongoing underlying signals of defensiveness is evident in the trading action of EUR/USD and AUD/USD.