All things considered, the Euro reacted in a very quiet manner to today’s news. A strong read on private ADP Payrolls along with better than expected Nonfarm Productivity and Unit Labor Costs supported the dollar this morning.
All things considered, this was a very quiet session for the euro. The currency traded in a range of less than a penny in the face of a deadlocked Italian election, the formation of a coalition government in Germany and President Trump’s trade tariff talk.
The U.S. dollar was set to end the week on a positive note after Fed Chair Jerome Powell testified twice and other Fed speakers signaled a hawkish view on the economy. The U.S. dollar had appreciated on a weekly basis up until Thursday when President Donald Trump announced a 25% tariff on steel and 10% on aluminum imports.
The U.S. dollar sold off this afternoon, losing about 0.5% from session highs on newly imposed tariffs on aluminum and steel imports. This news crowded the headlines and overshadowed Fed Chair Powell’s congressional testimony. The euro traded to a session low of 1.2166 as Powell began, but reversed sharply in an outside-bullish reversal session.
Concerns over a trade war have put downward pressure on the stock markets and the U.S. dollar. The markets sold off sharply yesterday and shares have opened weaker again today. The dollar has sold off against the yen and the euro, although it is holding its own relatively better against other currencies, most notably the commodity currencies.
The U.S. dollar depreciated across the board versus major pairs despite consumer prices rising more than expected. Inflation anxiety had triggered a sell-off in global stock markets with the Fed expected to ramp up their interest rate hike path yet the dollar did not benefit as higher rates have already been priced in by the market.
As we are heading towards the weekend, the dollar is beginning to come back to life again. A lot of investors and analysts were left scratching their heads after Wednesday’s dramatic moves in the markets as dollar reversed earlier gains to head lower despite the release of stronger-than-expected CPI inflation data. The greenback extended its losses on Thursday thanks to momentum selling, before bouncing back today.