Is The EUR/USD Rise Temporary? Fears Of A Recession Emerge

The EUR/USD is trading around $1.2300, at the upper end of a very narrow range between $1.2260 and $.12302. These are narrow ranges even for Mondays, which are usually somewhat slower.

The tight trade contrasts the action around several geopolitical developments. The see-saw around trade relations between China and the US continues. After Trump tweeted that he will impose further tariffs on China early on Friday, the tone over the weekend was different. The US President said that his Chinese counterpart Xi Jinping and he will remain friends. Soothing words also came from Treasury Secretary Steven Mnuchin. However, reports coming out of China suggest that the world’s second-largest economy may be contemplating a devaluation of the Yuan, a move that serves as an escalation in trade.

So far, higher trade tension pushed the US dollar down while optimism has pushed it higher. And while today’s forex moves are minimal, things could erupt at any moment.

More: Trump tariff plan explained: What are trade wars and how do they affect currencies

Elsewhere, North Korea has notified the White House that it is ready to discuss denuclearization, adding to hopes for peace. In Syria, a bombing of an airbase was attributed to Israel. This follows a chemical attack by the Syrian regime that was condemned by the West. Both developments did not move the needle in the EUR/USD.

In the euro-zone, we learned about further signs of a slowdown. The Sentix Investor Confidence measure extended its falls and reached 19.6 points, worse than expected and an extension of the drops from the highs. The disappointing forward-looking gauge joins the hard data reported from Germany last week: factory orders, industrial output, and retail sales all missed the mark.