Euro Rallies on Risk-On Sentiment, Later Declines as Markets Cool Off

The euro today rallied higher against the US dollar during the Asian session mainly due to the risk-on sentiment following the US-China trade truce. The euro later declined in the early European session as market sentiment became neutral and the EUR/USD currency pair moved into negative territory.
The EUR/USD currency pair today rallied to a high of 1.1378 before dropping to a daily low of 1.1318, but had retraced most of its losses at the time of writing.
The currency pair’s initial rally was triggered by the risk-on sentiment that pervaded the markets after the ceasefire in trade hostilities announced by the US and China on Saturday. According to the White House, President Donald Trump and Chinese leader Xi Jinping agreed not to impose any further tariffs on exports for 90 days as they worked towards an expedited trade deal. Investors reacted positively to the news, which led to a large outflow of funds from safe haven currencies such as the US dollar into riskier currencies such as the euro.
The pair headed lower in the early European session despite the release of positive manufacturing PMI data from Germany, France and the eurozone by IHS Markit; all the three prints beat consensus estimates. The pair later rallied higher in the early American session despite the release of positive US ISM employment and manufacturing PMI data.
The pair’s future performance is likely to be affected by geopolitical events given the lack of major releases from the European and American dockets tomorrow.
The EUR/USD currency pair was trading at 1.1357 as at 16:19 GMT having recovered from a low of 1.1318. The EUR/JPY currency pair was trading at 128.96 having risen from a low of 128.52.

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