EUR/USD: Fears of EU-US trade dispute may weigh over common currency

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  • EUR/USD may come under pressure on fears of US-EU trade war. 
  • resident Trump is likely to hit the EU with punitive tariffs, according to Politico. 

EUR/USD may suffer losses in Europe on fears of a bitter confrontation between the European Union (EU) and its close ally US.

EU officials told Politico on Friday that President Trump has won the right to punitive tariffs on the EU products following the US victory in the long-running transatlantic dispute illegal subsidies granted to European aerospace giant Airbus.

Officials said Trump can collect anywhere between a total of between €5 billion and €8 billion, while another said the maximum sum was close to $10 billion.

Germany, already feeling the pinch of the global trade tensions, could suffer big time if Trump imposes tariffs on the EU goods, as feared by some observers. Other European countries such as Ireland, Italy or France have a lot to lose if tariffs are imposed on European goods.

The EUR, therefore, could come under pressure in the European session. As of writing, EUR/USD is trading at 1.1071, having hit a high of 1.1086 in the Asian trading hours.

Also, escalating geopolitical tensions in the middle east could put a bid under the safe haven treasuries and the US Dollar.

Oil prices jumped 20% in the early Asian trading session while Wall Street futures fell after Saturday’s attacks on Saudi Arabia’s crude facilities knocked out more than 5% of global oil supply.

Yemen’s Iran-backed Houthi rebel group claimed responsibility for the attack. A senior US official, however, told reporters on Sunday that evidence indicated Tehran was behind the drone strike.

The risk sentiment may recover, keeping the have demand for treasuries under check if Saudi officials downplay fears of an extended production outage.

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