The world’s most popular currency pair is flirting with the 1.1700 level once again, holding up in the high range that characterized its trading in recent days. EU Leaders convene in Salzburg, Austria to discuss Brexit among other topics. The recent commentary by officials such as UK PM Theresa May, Irish PM Leo Varadkar, and EU Commission President Jean-Claude Juncker has reflected a deadlock in discussions. The British Pound is moving on every headline, and the common Euro is receiving some of the ricochets.
Markets remain calm after the US announcement of a 10% tariffs on $200 billion worth of Chinese goods. The decision was telegraphed in advance, 10% is at the lower end of the range, and China’s response has been relatively moderate. However, headlines from that front may move markets. So far, the calm pushed the US Dollar down.
On the other hand, the greenback enjoys rising US yields. The benchmark 10-year Treasury yield has settled above 3%. The effect is mostly felt against the Yen, but the EUR/USD also feels part of it.
In the euro-zone, concerns remain about the Italian budget. Coalition partners want to surpass the 2% deficit while Finance Minister Tria and European officials want a lower one. The story is currently on the backburner but may come to the forefront.
The economic calendar remains light with the Philly Fed Manufacturing Index and Existing Home Sales coming from the US. Euro-zone consumer confidence and a speech by Bundesbank President Jens Weidmann stand out in Europe. All these events play second-fiddle to trade tensions, yields, and Brexit headlines.
Eventually, something will have to give. A long period of stability is usually followed by an explosive move. The market is yet to choose a direction.
