“Press reports indicate the Trump Administration will delay its “Section 232″ tariffs on autos and parts for up to six months,” TD Securities analysts note.
“This comes amid increased trade tensions with China and only days before a 18 May deadline on whether the Administration would proceed. Risks remain that this report is premature. We remain cautious until a formal announcement is made and will monitor the situation closely.”
“If confirmed, this delay should help draw a line under potential EURUSD weakness. The situation remains highly fluid, but we have long considered a potential pivot in trade conflicts to Europe as one of the greatest near-term downside threats to EUR.”
“An official announcement should help return the focus in EURUSD back to more traditional fundamentals. Here, we note the region’s macroeconomic backdrop has improved in recent weeks. Indeed, “hard data” surprises have turned increasingly positive. We will need to see if this generates sustained gains in (real) bund yields, however, while the 6 June ECB meeting is the next major event risk. For now, 1.1175 (+/-) is a key pivot. Unless a new bearish catalyst emerges, the 26 April low (1.1112) could represent the trough for this cycle.”