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- EUR/USD edges upward, approaching 1.1325 as the US Dollar experiences selling pressure in anticipation of the Federal Reserve’s monetary policy deliberations scheduled for May 6-7.
- US President Trump voices optimism regarding the imminent conclusion of trade agreements this week.
- The European Central Bank is widely anticipated to maintain its course of lowering interest rates, despite the recent uptick in Eurozone inflation data for April.
EUR/USD is trading modestly higher, hovering near 1.1325 during Monday’s European trading session, extending its recovery from a three-week nadir of 1.1265 reached late last week. This upward momentum in the major currency pair is primarily fueled by persistent uncertainty surrounding US-China trade relations, which is weighing on the US Dollar (USD). Furthermore, investors are exhibiting caution as they await the Federal Reserve’s (Fed) forthcoming monetary policy statement on Wednesday, where the central bank is expected to hold rates steady but may signal future policy adjustments based on incoming economic data.
The US Dollar Index (DXY), a gauge of the Greenback’s performance against a basket of six major currencies, has declined to approximately 99.80, although it remains within Friday’s trading range, suggesting a degree of consolidation. The index’s weakness reflects the aforementioned concerns about trade and the impending Fed decision.
Over the weekend, US President Donald Trump, in comments to reporters, conveyed confidence that bilateral trade agreements with certain trading partners could be finalized and announced this week. These potential agreements, while not specified, are seen as a positive sign for global trade relations. However, he confirmed not having any dialogue with Chinese leader Xi Jinping this week, a detail that tempers enthusiasm and underscores the ongoing complexities of the US-China trade dynamic. While a direct conversation is not planned, the President did not rule out ongoing discussions between lower-level officials from both countries.
While the announcement of bilateral trade deals by Washington would suggest that the perceived threat of tariffs proposed by US President Trump may have reached its zenith, the protracted and often contentious relationship between the world’s two largest economies is expected to continue to keep market participants vigilant. Any escalation in trade tensions could trigger renewed risk aversion and further impact currency valuations, particularly for those currencies sensitive to global trade flows. Investors are closely monitoring any developments that could signal a shift in the trade landscape.
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