EUR/USD Drops as U.S.A Mulls Import Duties On European Goods

EUR/USD Drops as U.S.A Mulls Import Duties On European Goods
June 24, 2020


The euro dollar declined against the greenback yesterday despite the release of better than anticipated Ifo Business Climate index data from Germany. Even the data published by the National Bank of Belgium indicated an improvement in business conditions. The main reason for the euro dollar’s decline is that there are news reports indicating that the U.S. administration is studying the possibility of imposing fresh duties on $3.10 billion worth of goods from the UK, France, Spain, and Germany. In the past 24 hours, the EUR/USD pair has declined from a high of 1.1325 to a low of 1.1257.

According to the Ifo institute of Germany, the business environment in the company improved to 86.20 in June, from 79.70 in May, reflecting the most significant jump since the data began to be published in 1990. Analysts surveyed by Thomson Reuters had anticipated a reading of 85. The reading indicates a strong recovery in Europe’s economic powerhouse.

Pointing to the reading, Clemens Fuest, Ifo President, said, Companies’ assessments of their current situation were somewhat better. Moreover, their expectations leaped higher. German business sees the light at the end of the tunnel.”

In Belgium, the National Bank of Belgium reported an improvement in the business conditions index to -22.90 in June, from -34.40 in the earlier month. Economists had anticipated a reading of -25.10.

The reading indicates almost a 40% recovery from the losses recorded in March and April. The business environment is improving mainly in services associated with business, a sector severely hit by the COVID-19 issue. In the building industry, morale among managers of enterprises has strengthened considerably. However, the manufacturing industry witnessed a weak increase in confidence. Overall, the recovery seen in May is gaining strength. Notably, the trade sector is seeing robust demand, surpassing forecasts for orders placed with suppliers.

In the U.S., the data published by the Federal Housing Finance Agency (FHFA) indicates that the House Prices increased 0.2% in April, up from 0.1% in the earlier month. Economists had anticipated house price index to increase by 0.3%. Between April 2019 and April 2020, the house price index rose 5.5%.

Commenting on the house price index data Dr. Lynn Fisher, Deputy Director of the Division of Research and Statistics at FHFA, said, “U.S. house prices posted another positive monthly increase in April. Regionally, results varied. Two of the usually stronger growth areas, the Mountain and Pacific divisions, were flat over the month, but other divisions continued to experience strong price appreciation even with all of the COVID-19 challenges. [….] We expect the normal spring bump in sales was pushed off by the COVID-19 shutdowns and may extend into the summer months as states reopen and real estate sales pick back up.”

In a separate news report, the U.S. Mortgage Bankers Association has stated that the mortgage applications in the country declined 8.7% in the week ended June 19th, following an 8% surge in the earlier week. While home loan refinance applications decreased 11.7%, homebuyer mortgage applications fell 3%, following five consecutive weeks of increments. On a y-o-y basis, refinance applications rose 76%, and purchase mortgage volume increased 18%. The average fixed 30-year mortgage rate was at the lowest level of 3.3%.

As per the Energy Information Administration, in the week ended June 19th, crude oil inventories rose 1.40 million barrels from the earlier week. The U.S. crude inventories stood at 540.70 million barrels, up 16% from the five-year average for this period.

In the meanwhile, news reports indicate that the U.S. Trade Representative (USTR) is studying the prospects of imposing fresh tariffs on European goods such as olives, gin, beer, and trucks, while slapping additional duties on aircraft, cheese, and yogurt. Almost $3.10 billion worth goods would be subject to additional duties. France, Germany, Spain and the U.K. are the countries that would be affected by the increase in duties.

The U.S. plan to import additional duties on goods from Europe is expected to keep the euro weak against the greenback in the days ahead.

Technically, the EUR/USD pair is facing strong resistance at 1.1350. The next support is anticipated only near 1.1110. The stochastic oscillator is also descending from the overbought region. Therefore, we are anticipating the currency pair to move down in the short-term.

EUR - technical analysis - 25th June 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.



Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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