EURUSD has entered in 2020 on a positive note. EURUSD rose 2.8% in the fourth quarter of 2019. Continued de-escalation of the US-China trade tensions and signs of stability in the eurozone economy are driving further gains of the euro. Here is the EURUSD Fundamental Analysis of 02 January, 2020.
02 January, 2020 | AtoZ Markets – The EURUSD held steady at $ 1.1215, after gaining 1.8% in December to reach its highest level since early August. It now looks ready to challenge the August peak of $ 1.1249. The currency gained more than 2.8% in the fourth quarter of 2019, the largest gain in a single quarter since the third quarter of 2017. Despite this, the pair closed the year with a loss of 2.2%.
EURUSD Fundamental Analysis – 02 January, 2020
The dollar has started the new year where it left the old one, on the back foot. Investors wagered US economic outperformance could end as optimism on trade improves the outlook for global growth.
Signs of progress in the Sino-US trade conflict undermined the dollar for much of December, leaving its index (DXY) down 1.9% for the month. It was up only a fraction Thursday to 96,546, after hitting a six-month low before the holidays. Elias Haddad, a senior strategist at the Commonwealth Bank of Australia, said:
“A more encouraging outlook for global growth and flush dollar liquidity conditions are undermining the USD.”
“Specifically, the parameters of global fiscal/monetary policy will remain accommodative in 2020, and the slowdown in China’s growth will stabilize.”
The Chinese central bank has reduced the amount of liquidity that banks must hold as reserves on Wednesday. It was freeing up about 800 billion yuan (114.91 billion US dollars) to support the economy.
A survey of the Chinese manufacturing industry on Thursday showed that activity was still expanding in December, while confidence increased as trade tensions eased.
Sino-US Trade Concerns
The dollar benefited from the outperformance of the US economy for much of 2019. But a softening of Sino-US Trade concerns have heightened optimism that this year may favour other major nations.
Activity was weak on Thursday. Traders were on the lookout for any repeat of last January’s “flash crash” when massive stop-loss selling swept through an illiquid holiday-hit market.
The Federal Reserve has already avoided a tightening of the loan markets. Banks are taking only a small portion of its $ 150 billion in year-end funding, leaving pension rates at their lowest level since March 2018.
The People’s Bank of China (PBOC) latest effort to stimulate growth is also good news for the euro. China is the euro zone’s main trading partner. China’s central bank will decrease the reserve requirement for commercial lenders by 50 basis points from Jan. 6, adding about 800 billion yuan ($ 115 billion) in liquidity to the financial system.
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