EUR/USD

EUR/USD

09 August 2018Reading time: 2 minutes

The trade conflict between the United States and China has escalated further in the past period. The American import tariffs on several Chinese goods might be increased with not 10 percent, but even 25 percent. This would apply on goods with a total value of 200 billion dollar. News agency Reuters reported soon afterwards that China will take a counter measurement by imposing import tariffs worth of 60 billion dollar on American goods. Europe was also in dispute with the US, but late July the head of the European Commission Jean-Claude Juncker prevented a trade war. For now the US and the EU will not impose new import tariffs for each other and will cancel existing tariffs. It remains to be seen how this worldwide trade conflict will develop in the coming period.

As a result of the increased geopolitical tensions, the sentiment on the financial markets deteriorated and the value of the dollar increased against other currencies. As long as uncertainty keeps on dominating the financial markets, it is expected that the value of the American dollar will continue to grow.

The dollar also gained extra strength thanks to the positive American macro-economic figures. In the second quarter, the GDP of the US rose on an annual basis with 4,1 percent. This is the strongest growth since 2014, but was lower than the average of 4,2 percent which economists were counting on. Furthermore it seems that the American employment is developing positive. The monthly jobs report of the American ministry of labor showed that the jobs growth in July did not grew further than 157.000 jobs, whereas economists counted on an increase of 193.000 jobs. However, at the same time the numbers about May and June where revised upwards. The job growth over these two months is 59.000 higher than previously estimated. The American unemployment remained stable in July at 3,9 percent.

As a result of the strong American economic figures, the Federal Reserve maintained the current interest rate early August. Traders and investors polled by Bloomberg, believe there is a large chance that the interest rate will be increased twice this year. If the Federal Reserve would increase the interest rate, it is possible that this might support the exchange rate of the Dollar.

The future exchange rate of the USD/EUR is subject to several political, industrial and sector specific as well as economic factors. Investors should consider such risk when making their investment decisions. Developments can be different at any time than investors expect, which can result in capital losses.

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26/06/2019 22:26:51