The EUR/USD is trading in the mid 1.1500s, lower on the day. The US Dollar is gaining ground across the board for three reasons.
1) Fading Trump’s troubles
US President Donald Trump remains in trouble over accusations of illegal campaign financing made by his former lawyer, confidant, and fixer Michael Cohen. However, after Trump’s rebuttal and a short media attention span, markets are not so worried anymore.
The US Dollar fell on new revelations on Wednesday and is recovering now.
2) FOMC Minutes
The FOMC Meeting Minutes from the latest decision conveyed an optimistic message about the economy. More importantly, the Fed all but said that they are going to raise interest rates in September. Concerns about trade were not elevated to a new level.
Monetary policy divergence continues favoring the US Dollar.
3) New China tariffs
The Administration implemented new levies worth $16 billion of Chinese goods. This was well-telegraphed in advance. With this move, the tariffs on China have now reached $50 billion. The US threatens to slap duties on no less than $200 billion of Chinese goods.
While the move and the timing were expected, it comes amid talks between Chinese and US officials in Washington. Escalations in the trade wars are beneficial to the greenback.
In the euro-zone, the Flash Purchasing Managers’ Indices for August came out marginally above expectations. There is no imminent economic slowdown according to Markit’s forward-looking measures.
The more important event of the day is the publication of the Meeting Minutes from the European Central Bank, detailing the deliberations at the July meeting. The focus is on the timing of the rate hike and also other topics. Draghi’s dovish tone on rates sent the Euro down back then.
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