Declining U.S. Yields And Growing Economic Concerns Weigh Down On The US Dollar
The US dollar is once again facing pressure as due to the mounting concerns regarding the China-U.S. trade war, which has gone on for longer than anticipated, leading to a negative impact on economic growth.
U.S. President Donald Trump is adamantly pushing China to a corner with additional tariffs, signaling the unfortunate continuation of the trade war. This situation has not only been negatively affecting the Chinese economy, but the U.S. is also feeling the effects of the prolonged trade dispute. Another slippage was reported in the U.S. bond yields, and the North American country’s economic growth has also been slowed.
The US dollar showed signs of weakness this week, but it also saw some recovery after President Trump lowered his guns through a softened outlook. He even predicted that his government and China would strike a deal. Market experts and investors are also concerned about the increasing risk of an economic recession, especially now that the global trade situation is in a depressed mood.
The EUR/USD chart has so far demonstrated an overall bearish trend this week with the exchange rate dropping from Monday’s high at 1.1153 to the lowest point so far on Wednesday at 1.1073. The trend also features some bullish movement which was however overpowered by the bears. These bullish movements indicate instances where the Euro gained momentum against the USD courtesy of the pressure that the dollar has been receiving.
The overall bearish trend represents the dollar winning back lost ground as it was buoyed by the increasing hopes of a trade deal. The USD might be facing some trade war pressure, but the Euro has underperformed for quite a few months now on the weight of the Brexit issue. This is the major factor dragging down the value of the currency. The EUR/USD exchange rate traded at 1.1081 at the time of this press.
Analysts are concerned about the trade war
The effects of the prolonged trade war between China and the U.S. are becoming more pronounced, and this has become a source of concern. Investors believe that the trade standoff will push the U.S. economy to the edge if the governments of the two countries fail to come up with a workable trade deal.
The situation took an alarming turn after President Trump announced plans to add more tariffs to Chinese products imported into the U.S. The move also seems to be aimed at making it more difficult for U.S. companies that have their production activities in China. Meanwhile, China retaliated with announcements about additional tariffs on U.S products.
The escalated trade war has so far weakened the Chinese Yuan, forcing the Chinese government to consider options through which they can keep the economy afloat. There have also been reports that China has expressed interest in fresh talks through which it hopes to secure a viable trade deal with the U.S. However, there is still a lot of uncertainty in the global market about the likelihood of the two sides struck a deal anytime soon.