EUR/USD: Geopoliticals risks can send the euro down

EUR/USD has been under pressure amid intensifying Sino-American tensions while objection to the Franco-German plan is weighing on the euro. Yohay Elam, an analyst at FXStreet, assesses if these reasons can send the pair lower. 

See: German IFO Business Climate Index beats estimates with 79.5 in May

Key quotes

“Lawmakers in Washington are advancing a bill that would sanction Chinese officials for human rights violations in Xinjiang. The world has been watching protests in Hong Kong against a suggested Chinese law that would tighten Beijing’s grip on the territory, with the West angry but seemingly unwilling to act. China is unhappy with closer relations between America and Taiwan.” 

“Investors have curbed their enthusiasm over the Franco-German €500 billion plan. As with everything in Europe, things are moving slowly, and a final decision may have to wait until the next leaders’ summit in mid-June. While the news is weighing on the euro, investors still expect Germany’s backing of the plan to win the day and support the recovery.”

“Coronavirus statistics remain encouraging in Europe, with substantial falls in the number of deaths and new infections. In the US, mortalities are getting close to 100,000, with only a moderate deceleration.”