GBP/USD: Trade Wars & Brexit Concerns Drive Pound Lower vs. Dollar
  • Easing lockdown measures keeps risk sentiment & Euro (EUR) supported
  • US riots are unnerving investors, Trump threatens to bring in the military
  • Initial signs that US – China trade deal could be under threat
  • At 08:55 EUR/USD is trading flat at US$1.1135

The Euro is trading flat versus the US Dollar on Tuesday, consolidating gains after a six-session winning streak. The Euro US Dollar exchange rate settled on Monday +0.16% at US$1.1135 on broad US Dollar weakness and despite slightly disappointing Eurozone manufacturing data.

At 08:15 UTC, EUR/USD is trading flat at US$1.1135 amid optimism surrounding the reopening of global economies and widespread civil unrest in the US.

The Euro is trading around levels last seen on March 17th as risk appetite remains elevated against a backdrop of economies easing lockdown restrictions across Europe and the globe. The recently agreed stimulus plan to steer the Eurozone through the coronavirus crisis is also underpinning the common currency.

Whilst eurozone manufacturing activity data was mildly disappointing in the previous session, the impact on the euro was short lived. Factories across Europe are restarting; however, demand remains subdued which was evident in weak new orders.

There is no high impacting Eurozone data today. Instead the focus will start to shift towards the European Central Bank (ECB) monetary policy meeting on Thursday.

Whilst risk on sentiment has been supporting the Euro, it has simultaneously been dragging on the safe haven US Dollar. However, sentiment is fragile as US unrest and cooling US – China relations linger.

Civil unrest and riots in the US have until now been overlooked by the markets. However, the protests following the death of George Floyd, whilst being arrested by Minneapolis police, threaten to weigh on sentiment, particularly after President Trump threatened to bring in the military to bring the situation under control. Increasingly violent protests could unnerve investors further.

US- China relations are also under the spotlight on Tuesday after two state owned Chinese enterprises were instructed to halt purchases of US farm imports. This is the clearest signal yet that US – Chinese tensions could put the US – China trade deal at risk. Further signs of US – China tensions could boost flows into the safe haven US Dollar.

There is no high impacting US economic data due for release today. In the absence of data sentiment will continue to drive the greenback.


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