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Euro drops on news about more trade tariffs
The euro (EUR) lost 0.47% against the U.S. dollar (USD) during Monday's volatile trading session.
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Possible effects for traders
Yesterday's trading session faced extreme volatility, with the intraday EURUSD exchange rate fluctuating in a broad range of 1.08780–1.10500. Initially, the pair surged after news about U.S. President Donald Trump considering a 90-day pause on tariffs. However, the White House officials quickly denied the report, sending EURUSD lower again. Later that day, Trump warned about an additional 50% tariff on China if the country imposed its retaliatory tariffs. All these made traders even more bearish and prompted them to seek safe-haven currencies like the U.S. dollar, the Swiss franc, and the Japanese yen. 'Because tariffs are thought to be hurting world growth, those currencies that seem to be more like risk-on currencies—the dollar bloc and the Scandies—they are underperforming. On the other hand, the currencies that are typically safe-haven currencies—like the Swiss franc and yen—are performing better', said Marc Chandler, chief market strategist at Bannockburn Global Forex.
According to Reuters, traders are watching for signs that large sovereign holders, including China, may be reducing their U.S. debt holdings. If China were to accelerate the sale of U.S. bonds, the U.S. dollar would weaken, pushing EURUSD higher. Meanwhile, in response to U.S. tariffs, the European Commission proposed counter-tariffs of 25% on a range of U.S. goods. At the same time, the European Commission leaves the door open for a possible deal. According to Reuters, officials offered a 'zero-for-zero' tariff deal to avert a trade war. EU ministers agreed to prioritise negotiations with the U.S. while striking back with targeted countermeasures next week. Any negotiations progress will certainly help lift EURUSD, but if the talks fail, the pair will likely fall sharply.
EURUSD rose during the Asian and early European trading sessions. The economic calendar is relatively light today. Still, more news on possible trade deals and tariffs may trigger additional volatility in EURUSD. Key levels to watch are resistance at 1.10500 and support at 1.08780.
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