EUR/USD strengthened above 1.0400 in the European session on Wednesday (5/2). The major currency pair strengthened as the US Dollar (USD) extended its decline for the third trading day.
The US Dollar Index (DXY), which tracks the Greenback against six major currencies, fell near 107.50 as it lost some risk premium, with investors assuming that the scope of the trade war will not widen.
Market participants expect the trade war to be mainly between the United States (US) and China because China has retaliated with 10% tariffs on various US exports, including farm equipment, some cars, and energy goods such as Coal and Liquefied Natural Gas (LNG).
Along with other countries in the world, investors expect US President Donald Trump to use tariffs as a tool to have a dominant position in negotiating deals with trading partners. President Trump's delay of 25% tariffs on Canada and Mexico stems from expectations that the tariffs are more of a political maneuver.
Meanwhile, the next trigger for the US Dollar (USD) will be the US Nonfarm Payrolls (NFP) data for January, due on Friday. The official employment data is expected to influence speculation about the Federal Reserve's (Fed) monetary policy direction.
On Wednesday, investors will focus on the US ADP Employment Change and the ISM Services Purchasing Managers' Index (PMI) data for January. (Newsmaker23)
Source: FXstreet
