Euro Declines on Escalating Trade Tensions and Draghi Speech

The euro today declined significantly against the US dollar even as trade tensions between the USA and China escalated increasing demand for the greenback. The EUR/USD currency pair declined further in the early European session following dovish comments by the European Central Bank President regarding the timing of the bank’s first interest rate hike.

The EUR/USD currency pair today declined from a high of 1.1645 to a low of 1.1534 in the early American session as the US dollar gained against the euro.

The currency pair headed lower early in today’s session after it emerged that President Donald Trump‘s administration had imposed 25% tariffs on $50 billion of Chinese imports. The Chinese government retaliated with tariffs on high-value American imports and suspended all trade agreements with the Trump administration. The euro’s decline was further triggered by declining German 10-year bund yields, which hit 3-week lows of 0.350% losing about 5 bps. The currency pair’s decline was mainly due to the risk-off sentiment as US-China trade tensions also affected European equities.

The pair’s decline was further accelerated by Mario Draghi‘s dovish comments regarding future interest rate hikes as he insisted on the need for significant monetary accommodation within the Eurozone. He also stated that uncertainty regarding the regions growth outlook had recently increased.

The currency pair’s future performance is likely to be affected by the developing US-China trade fights, which are likely to escalate in the near future.

The EUR/USD currency pair was trading at 1.1558 as at 13:08 GMT having declined from a high of 1.1645. The EUR/JPY currency pair was trading at 127.01 having dropped from a high of 128.23.

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