Euro-Dollar Under Pressure with U.S.-EU Trade Tensions Back on Radar

The Euro was under pressure Friday as the Dollar strengthened in response to signs the U.S. economic backdrop is not quite as downbeat as some had feared although the single currency is at increasing risk from a trade conflict between the U.S. and European Union.  

The Euro advanced strongly on the Dollar early last week but was lower against its almighty rival by the close on Friday, although it's now near to a key support level on the charts and will driven mostly in the coming days by economic data and other developments on the opposite side of the Atlantic. 

Euro exchange rates advanced Thursday following the release of data that shows the decline in Germany's industrial sector might be bottoming out, paving the way for a potential recovery in the Eurozone's industrial heart in 2020.

Volatility in the Euro-to-Dollar exchange rate has spiked over the past 24 hours after the Dollar rose sharply in response to some better-than-forecast U.S. data, and in the process drove the EUR/USD down half a percent.

The Euro outlook improved Tuesday after Eurostat data showed inflation hitting a nine-month high in December and consumers opening their wallets in November, adding to other recent signs that the continental economy is stabilising in the wake of an 18-month retrenchment.

The cooling of tensions in the Middle East has allowed the Euro to recapture some of the ground it lost to the Dollar in the wake of news the U.S. had killed senior Iranian military commander Qasem Soleimani, and technical analysts suggest the Euro-to-Dollar exchange rate is in the process of restarting its uptrend.

The Euro ceded ground to the Dollar in the opening days of the New Year and rising tensions between the U.S. and Iran mean the it could face further downward pressure early in the new week, although technical analysts say the downside is limited and that fresh gains are likely before long.  

The Euro was on course for its fourth consecutive day of gains over a rapidly weakening Dollar Monday even as risk appetites appeared to falter, although U.S. manufacturing PMI surveys due over the remainder of the week are a downside risk to the Euro-to-Dollar rate.