Euro Rallies on China’s Retaliatory Measures, Drops Shortly After

The euro today leapt to new monthly highs against the US dollar after news reports suggested that China was planning retaliatory tariffs on US exports. According to the Guardian, China is set to implement a 25% tariff on $60 billion worth of US imports as well as halting bond purchases among other measures.
The EUR/USD currency pair today rallied from a low of 1.1221 in the early European session to a high of 1.1263 in the early American session before retracing most of its gains.
The currency pair opened today’s session trading sideways as investor risk sentiment remained muted following the collapse of US-China trade talks on Friday. After the talks collapsed Chinese vice-Premier Liu He said that his country would not compromise on its principles and that they were not worried about the new tariffs. On his part, President Donald Trump claimed that the US was exactly where it wanted to be in the trade war and warned of tougher measures if he is re-elected in 2020. The move by the Chinese government was a major relief to euro bulls who drove the pair higher.
The pair soon headed lower as the US dollar recovered as tracked by the US Dollar Index, which hit a high of 97.37. Investors were disappointed by the Chinese retaliatory measures, which seemed weak in the face of tough US tariffs.
The pair’s future performance is likely to be driven by trade headlines and tomorrow’s multiple eurozone releases.
The EUR/USD currency pair was trading 1.1233 as at 15:54 GMT having dropped from a high of 1.1263. The EUR/JPY currency pair was trading at 122.58 having crashed from a high of 123.33.

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