EUR/USD – The dollar drops on tariff plans – Analysis for March 2nd 2018
The EUR/USD pair unexpectedly surged, despite satisfactory batch of US data. Once again the US President caused a turmoil on the currency market by informing about a plan of imposing tariffs on steel and aluminium. Support is set at 1.22, resistance at 1.23.
Yesterday brought the release of unemployment rate in the euro zone, which came along with the expectations at 8.6%. A batch of data was also released in the US. Personal income rose by 0.4%, a little bit more than expected. PCE inflation numbers came as forecasted at 1.5%. Highly important ISM numbers came much stronger than expected. Manufacturing came at 60.8 against the forecast of 58.7. Employment came at 59.7, much stronger than 54.2 seen in the previous month.
The reading would have supported the dollar, but their influence was highly muted due to the news from Washington. Donald Trump informed that the US will impose tariffs on steel and aluminium. This raised fears that it will spark a global trade war. United States are the second biggest importer of steel in the world. Among other things, the metal is used by the car industry, and imposing the tariffs would make the prices move higher. Economists claim it will slow down growth, while fueling inflation at the same time and it will hurt the US economy.
10:00 Euro zone – GDP Italy
16:00 USA – UoM Consumer sentiment
Pic.1. EUR/USD chart.
After a few day of gains, the dollar has found itself on the backfoot again and the EUR/USD pair climbed above the 1.22 level. There will be no important data releases today and amid the turmoil caused by the news about the tariffs we expect the pair to consolidate with a slightly bullish bias.