The EUR/USD is falling below 1.1600 on Tuesday after a slow-motion day on Monday. American traders are back to school after a long Labor Day weekend. The official end of the summer sees an increase in trading volumes and also a resumption of the trend: a stronger US Dollar.
The greenback is gaining ground on a risk-off atmosphere emerging from Emerging Markets. Argentina was the center of attention on Monday as President Mauricio Macri announced measures to stabilize the outflow of funds out of the nation and the fall of the Peso. The USD/ARS exchange rate ticked up in low-volume trading. The return of US traders will be the real test for the South American nation.
The Turkish Lira remains on the back foot despite fresh hopes for a significant rate hike on September 13th. Some euro-zone banks are exposed to Turkey. Indonesia and Brazil are additional sources of concern.
The troubles in Emerging Markets push the US Dollar higher on a risk-off atmosphere. The big elephant in the room remains the No. 1 Emerging Market and the world’s second-largest economy: China. The US is set to impose whopping tariffs worth $200 billion of Chinese goods as early as Thursday. The move would serve as a severe escalation in the trade wars. US President Donald Trump cut off a planned media outing on Monday to make phone calls related to trade.
The euro-zone has some trouble of its own. Markit’s Services PMI’s published on Monday came out slightly below expectations. More importantly, uncertainty about Italy’s budget plans is also a source of concern. Markets have been relatively calm about the euro zone’s third-largest economy, but an announcement about breaking the euro area’s budgetary rules may bring Italy to the forefront.
