EUR/USD remains subdued around 1.1350 due to signs of easing US-China tensions
EUR/USD faces challenges as the US Dollar gains strength, supported by signs of easing tensions between the US and China.
China announced exemptions for certain US imports from its 125% tariffs, offering a glimmer of hope for improved trade relations.
ECB’s dovish expectations are building amid rising concerns that Eurozone inflation could fall short of the central bank’s 2% target.
EUR/USD continues to weaken for a second consecutive session, trading around 1.1360 during Asian hours on Monday. The pair is under pressure as the US Dollar (USD) strengthens amid signs of easing tensions between the US and China.
On Friday, China exempted certain US imports from its 125% tariffs, according to business sources. The move has fueled hopes that the prolonged trade war between the world's two largest economies might be drawing to a close.
Adding to the sentiment, US Agriculture Secretary Brooke Rollins said on Sunday, as reported by Reuters, that the Trump administration is holding daily discussions with China regarding tariffs. Rollins emphasized that talks were ongoing and that trade agreements with other countries were also "very close."
Despite these comments, Reuters cited a Chinese embassy spokesperson on Friday, who firmly denied any current negotiations with the US, stating, "China and the US are not having any consultation or negotiation on tariffs." The spokesperson urged Washington to "stop creating confusion." Additionally, a Beijing official reiterated on Thursday that no "economic and trade negotiations" were underway and stressed that the US must "completely cancel all unilateral tariff measures" to pave the way for talks.
Meanwhile, dovish expectations surrounding the European Central Bank (ECB) are mounting, fueled by growing concerns that Eurozone inflation may fall short of the ECB's 2% target. Last Thursday, ECB policymaker and Finnish central bank governor Olli Rehn warned of downside risks to inflation, noting, "It is quite possible that the projections for medium-term inflation under the current circumstances may well be below the 2% target."
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