{"id":148122,"date":"2019-05-21T09:30:42","date_gmt":"2019-05-21T13:30:42","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=148122"},"modified":"2019-05-21T09:16:09","modified_gmt":"2019-05-21T13:16:09","slug":"trump-delays-eu-autos-tariffs-but-eurusd-continues-lower","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/05\/trump-delays-eu-autos-tariffs-but-eurusd-continues-lower\/","title":{"rendered":"Trump Delays EU Autos Tariffs But EURUSD Continues Lower"},"content":{"rendered":"
May 21, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

The EUR continues to trade lower this week despite Trump\u2019s Friday\u00a0announcement that tariffs on EU automobile imports to the US would be delayed by six months.<\/strong><\/p>\n

Trump recently stepped up\u00a0the trade war with China<\/a>\u00a0by raising tariffs on $200 billion of Chinese goods from 10% to 25%. He was also planning on raising tariffs on EU and Japanese automobile imports to the US.<\/p>\n

However, China retaliated with its own 25% tariffs on $60 billion of US goods. And it seems that the US has decided not to exacerbate worsening global trade relations once again.<\/p>\n

Trade Wars Heating Up<\/strong><\/h2>\n

Trump recently announced that he was\u00a0considering similar 25% tariffs on auto imports from Japan and the EU.\u00a0<\/strong>However, given\u00a0the potential for both these economic areas to retaliate with their own tariffs, Trump has instead opted to delay the tariffs for 180 days.<\/p>\n

Similar to last year, global markets cascaded lower in response to the fresh outbreak of tit for tat trade tariffs between the US and China. So, instead, the US will now engage in trade negotiations with both the EU and Japan\u00a0to address the imbalance in automobile imports.<\/p>

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Trump Cites National Security Threat<\/strong><\/h2>\n

When Trump announced an investigation into the automobile imports from these countries, he explained:<\/p>\n

\u201cUnder current circumstances, this action is necessary and appropriate to\u00a0remove the threatened impairment of the national security\u201d.<\/strong><\/p><\/blockquote>\n

The President also added:<\/p>\n

\u201cThe United States defense industrial base depends on the American-owned automotive sector for the development of technologies that are essential to maintaining our military superiority\u201d.<\/p><\/blockquote>\n

US Trade Secretary Robert Lighthizer will now have 180 days to report back to the president.<\/p>\n

What is Driving EURUSD?<\/strong><\/h2>\n

So, with the tariffs having been avoided for now, why is EURUSD still trading so heavily?<\/p>\n

Part of the reason is that\u00a0the market never seemed to fully price in the tariffs.\u00a0<\/strong>The majority of the market focus was\u00a0on the escalating trade tensions between the US and China. In fact, many banks had been expecting that such a delay would be likely.<\/p>\n

Furthermore,\u00a0the direct impact of any such tariffs, though negative, would likely be limited.<\/strong>\u00a0This is because\u00a0FX flows from the goods trade in EURUSD are diluted by financial flows.<\/strong><\/p>\n

The main issue driving EURUSD continues to be concerns surrounding the health of the eurozone economy. The manufacturing recession which has gripped the economy over the last year, as well as subdued inflation, have kept the ECB\u2019s hands tied when it comes to policy normalization.<\/p>\n

Implications for the ECB<\/strong><\/h2>\n

The ECB has been able to formally end\u00a0its QE program<\/a>\u00a0as of the start of the year. However, the planned Q3 rate hikes projected toward the end of last year have now been pushed out into 2020.<\/p>\n

As of now, there are concerns that should the tariffs eventually come into play, in six months time, the eurozone economy might suffer. The\u00a0tariffs would squeeze growth at a time when the ECB has barely any policy room left to manage the situation.\u00a0<\/strong>This would leave\u00a0a lower EUR as one of the only viable options for loosening financial conditions in the eurozone.<\/p>\n

Technical Perspective<\/strong><\/h2>\n

\"eurusd<\/a><\/p>\n

EURUSD continues to trade lower within the bearish channel which has framed price action over the last months. The sell-off has taken price down through the 1.1153 support zone as of today. This puts focus on a test of the 1.1129 level next, where we also have confluence with the bearish channel low. For now, focus remains on further downside unless we see a meaningful reversal above 1.1184.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex The EUR continues to trade lower this week despite Trump\u2019s Friday\u00a0announcement that tariffs on EU automobile imports to the US would be delayed by six months. Trump recently stepped up\u00a0the trade war with China\u00a0by raising tariffs on $200 billion of Chinese goods from 10% to 25%. He was also planning on raising tariffs […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-148122","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148122","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=148122"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148122\/revisions"}],"predecessor-version":[{"id":148131,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/148122\/revisions\/148131"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=148122"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=148122"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=148122"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}