**EUR/USD Remains Under Pressure Below Mid-1.1700s Amid Trade Concerns and USD Strength**
*By Haresh Menghani, FXStreet*
The EUR/USD currency pair continues to hover below the mid-1.1700s in the early European trading hours, weighed down by persistent global trade tensions and a broadly stronger US dollar. The bearish sentiment surrounding the major currency pair persists as investors remain cautious against the backdrop of escalating trade disputes, particularly between the United States and its trading partners.
This article provides a deeper dive into the key driving forces behind the weak performance of the euro against the dollar, outlining the major fundamental and technical factors influencing EUR/USD market movement.
## Global Trade Concerns Dampening Risk Appetite
Global financial markets remain edgy due to renewed trade protectionist measures. Recently intensified rhetoric from the United States about imposing additional tariffs on Chinese imports has reignited concerns over a potential global trade war. These escalating tensions threaten to disrupt global supply chains, reduce corporate earnings, and negatively impact business and consumer confidence globally.
– US trade policy is causing ripples across foreign exchange markets
– Latest reports indicate a possible new round of tariffs by the US administration, targeting around USD 200 billion worth of Chinese goods
– China’s response with reciprocal tariffs has further raised fears of a prolonged tit-for-tat tariff exchange
– Investors are moving to traditional safe-haven assets, thereby undercutting riskier assets like the euro
These trade-related worries have added to the downward pressure on the common currency. As a traditionally risk-sensitive asset, the euro tends to lose favour among investors during times of global uncertainty. Market participants are showing a preference for safer currencies, particularly the US dollar and the Japanese yen.
## Strengthening US Dollar Weighs Heavily on EUR/USD
Another significant factor exerting downward pressure on the EUR/USD is the continued strengthening of the US dollar. Several macroeconomic and geopolitical developments have supported dollar demand in recent weeks.
– The Federal Reserve’s optimistic stance on the US economy points to a continued path of rate hikes
– US economic indicators have remained solid, recently showcasing strong GDP growth and tight labor market conditions
– Fed Chair Jerome Powell has reaffirmed confidence in US economic momentum, reinforcing market expectations for further gradual interest rate increases
These developments have led to:
– Elevated US Treasury yields, making dollar-denominated assets more attractive to investors
– A surge in overall demand for the dollar, particularly as global uncertainties elevate its appeal as a safe-haven currency
This broad-based dollar strength has played a critical role in pushing the EUR/USD lower and keeping it suppressed below key technical resistance levels around 1.1750.
## Eurozone-Specific Challenges Add to Weakness
While global tensions and dollar strength are primary drivers of the euro’s underperformance, region-specific risks within the Eurozone also contribute to its vulnerability.
– Political instability in countries such as Italy and Spain fuel investor concerns about fiscal indiscipline and anti-EU sentiments
– Ongoing Brexit negotiations add another layer of uncertainty, especially with potential spillover effects on EU economies
– Mixed economic data from the Eurozone continue to point to uneven growth, with recent figures not providing sufficient impetus for the European Central Bank to signal more hawkish measures
The European Central Bank has retained a dovish monetary policy stance for now, especially when compared to the Fed’s tightening regime.
– ECB President Mario Draghi has emphasized patience and persistence, indicating that interest rates are unlikely to rise until the summer of 2019
– The slow pace of inflation and sputtering euro-area growth reduces the urgency for the ECB to ramp up policy normalization
This divergence between the Fed and the ECB in policy positioning puts the euro at a clear disadvantage against the dollar.
## Technical Picture: EUR/USD Faces Bearish Momentum
From a technical perspective, EUR/USD continues to trade with a downside bias. The pair’s inability to sustain a move beyond the mid-1.1700s highlights the dominance of
Read more on EUR/USD trading.