Euro Drops on Trade War Fears, Rallies on Mixed US Inflation

The euro today fell against the US dollar in a risk-off market environment as investor fears about an escalation in the US-China trade war dominated the markets. The EUR/USD currency pair recovered in the American session due to the greenback’s weakness despite the release of in-line US inflation data.
The EUR/USD currency pair today fell to a session low of 1.1070 before recovering and rallying to a high of 1.1097 in the American session to trade flat at the time of writing.
The currency pair fell during the first half of today’s session amid fears that President Donald Trump would not delay the US tariffs on Chinese exports scheduled for December 15th. Investors were also worried about the looming UK elections, which could lead to a quick Brexit if the ruling Conservative Party wins. The lack of major releases from the European dockets meant that there were no macro drivers to boost the single currency. Investors also stayed away from the single currency ahead of tomorrow’s first European Central Bank Governing Council meeting under Christine Lagarde, the new ECB President.
The release of the mixed US consumer price index data for November by the Bureau of Labor Statistics fueled the currency pair’s recovery from its daily lows. The headline CPI print came in at 0.3%, beating consensus estimates by 0.1%, while the core CPI print met expectations set at 0.2%.
The currency pair’s short-term performance is likely to be affected by the FOMC rate decision scheduled for 19:00 GMT and tomorrow’s ECB rate decision.
The EUR/USD currency pair was trading at 1.1096 as at 18:33 GMT, having rallied from a low of 1.1070. The EUR/JPY currency pair was trading at 120.59, having risen from a low of 120.37.

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