Foreign exchange market on Friday was marked by considerable volatility, as the EUR/USD pair continued to creep lower in face of persistent trade worries. In the Asian session, the euro-dollar currency pair fell to about 1.1380. This sharp drop indicates increasing investor concerns about the possible impacts of US-China trade war.
As the trading day continued, the Dollar’s momentum was dealt further blows. The most recent economic data showed US Initial Jobless Claims increased to 222,000, just above consensus estimates. This development added to a risk-averse mood among investors, weighing on the overall performance of the US dollar.
The EUR/USD pair hovered in negative territory, and the GBP/USD did the same. It pierced through the 1.3300 level. The drop came just ahead of an anticipated release of UK Retail Sales data. Market participants monitor this data very closely to glean key insights into consumer spending patterns and the overall economic well-being of the area.
The GBP/USD experienced a dramatic reversal. That reversal was powered by a Friday Bloomberg report suggesting that China might be on the verge of suspending its 125% tariff on some US goods. This bad news triggered swift and severe consequences. Market participants moved quickly to account for this change, sending the British pound lower because of the expected lowering of trade tensions.
Even with these downward indicators at play, some analysts predict the downside for the EUR/USD pair to be limited. Fears of an escalating trade war with China have increased. This development would help appreciate the euro against the dollar. Investors are still on edge as they look ahead to the next potential catalyst that could shift the balance between supply and demand.
Later on Friday, the market will be looking toward the final Michigan Consumer Sentiment reading. This holding hands with our other favorite key indicator provides amazing insight to what consumers are feeling and spending across the U.S. This economy data release could have major implications for the euro and the dollar. Traders will be particularly looking to gauge what it might portend for future economic activity …
In summary, the trading day on Friday paints a complex picture of the relationship between currency values and larger economic factors. Mounting uncertainty in international trade is upending investor optimism. This results in larger swings in value across key currency pairs, such as EUR/USD and GBP/USD.