LONDON, July 25 — The euro edged higher today ahead of a meeting between US President Donald Trump and European Commission President Jean-Claude Juncker but gains were limited with investors cautious about a trade rift between the two powers.
Lack of clarity over where a brewing US-European trade conflict is heading kept most major currencies, including the dollar, range-bound today as Juncker travelled to Washington for trade-focused talks with Trump.
The talks come after the United States imposed tariffs on European Union steel and aluminium, and Trump’s threats to extend those measures to EU-made cars.
“Risks remain tilted to the continuation of the tough rhetoric by the US president,” said Chris Turner, head of currency strategy at ING in London.
“Given that the risk of auto tariffs is a well-known threat, any major breakthrough today may not be enough to materially affect risk appetite. We look for the FX markets to remain stable today.”
The single currency was up 0.1 per cent at US$1.1694 (RM4.79). The dollar versus a basket of major currencies traded broadly flat at 94.52.
Some are puzzled at how little the impending US tariffs have budged the euro.
“The euro continues to stagnate in a sideways range despite the risk of a trade war becoming increasingly obvious,” said Commerzbank currency strategist Ulrich Leuchtmann in Frankfurt.
“But FX markets cannot ignore economic realities for long… The next trend will come. The only question is when.”
Trump reinforced his criticism last week of the Federal Reserve’s policy on raising interest rates, saying it could hurt the US economy.
Trump also accused the EU and China of manipulating their currencies, ignoring a custom that US presidents avoid openly interfering in financial markets.
“Short-term traders had to take notice of Trump’s comments but other countries did not take the bait. The dollar is fairly stable. There is no currency war,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note.
Investors were also eyeing a European Central Bank (ECB) policy meeting tomorrow for direction.
The ECB guided markets for steady rates “through the summer” of 2019 at a meeting last month, when it also announced it would shut its signatory bond-purchasing programme in December.
Against the yen, the dollar was flat at ¥111.12 (RM4.06) per dollar.
The yen found some support early this week on expectations the Bank of Japan might be a step closer to scaling back some of its aggressive monetary stimulus.
The Australian dollar slumped after data today showed inflation remained stubbornly low last quarter despite fairly robust economic growth. It traded 0.1 per cent lower at US$0.7414.
Risk appetites remained mostly firm, supported by strong US corporate earnings and hopes that China will boost fiscal support for its economy.
The offshore yuan strengthened half a per cent to 6.7905 per dollar. — Reuters
Source: The Malay Mail Online