Euro Gains & Hogan Wants to Reset EU-US Trade
- Euro hits 18-week high amid global optimism
- EU trade commissioner to meet US trade representative in mid-January
- The EU and US are attempting to forge a deal to eliminate overall import tariffs
Monday saw euro gains as it climbed to an 18-week high on the back of global optimism. The markets are more optimistic over the relations between the US and China, as well as global growth forecasts. The result is a declining demand for US dollars and a stronger euro.
US dollar experiencing weakness as euro gains
The US dollar has been experiencing some weakness recently. The currency has declined over the past three sessions. On Friday, it suffered the biggest drop in a single day since June.
This is due to low trading volumes due to the winter holidays. However, it’s also because investor demand has declined for the US dollar as a safe haven due to increased optimism.
Market sentiment improved during the Asian session on the back of an announcement from China’s central bank. The People’s Bank of China revealed it would be implementing a measure to reduce borrowing costs and improve economic growth.
Investors were also pleased by a report that predicts retail sales in China for 2019 would increase by 8%. This resulted in traders turning to currencies other than the greenback.
Thus, the euro reached $1.1211 during the Asian session, which is the highest level it has reached since August 13.
Poor data out of the Eurozone had hedge funds betting on a weak euro this year. However, various signs that the economy is picking up have given the euro a boost over the past few weeks.
The US dollar index hit 96.821, equating to a loss of 0.1%. For the whole year, the index has seen gains of 0.6%.
EU trade commissioner looking to reset EU-US trade
According to Reuters, on Monday, Phil Hogan stated he wanted to reset trade relations between the US and the EU. He is set to meet with US trade representative Robert Lighthizer around the middle of January.
EU trade commissioner Hogan stated that he spoke to Lighthizer right before Christmas. They agreed to meet to discuss the various issues causing problems between the EU and the US.
“There is no point in getting into the details of resolving trade irritants unless we agree a line on a common trade agenda. I will be seeking a reset of the EU/US trade relationship on issues like tariffs on steel and aluminum and the threat of US tariffs in response to a digital tax in Europe,” Hogan said.
Around the middle of 2018, the US imposed tariffs on steel and aluminum from Europe. The same has happened to $7.5 billion worth of goods from the EU. The latter is due to a disagreement over subsidies for Airbus.
Furthermore, the US is threatening more tariffs in retaliation for France imposing a digital services tax.
The ultimate objective is for the US and the EU to work out a deal whereby all import duties are eliminated. However, the sticking point is farm products, which the US wants to include and the EU doesn’t.
The EU has said they would act as a single entity regarding the threat of higher US tariffs on French products. Additionally, the threat to increase tariffs on the EU due to the Airbus disagreement is making it difficult to reach an accord.