EUR/USD rose above 1.0400 in the European session on Wednesday. The major currency pair strengthened as the US Dollar (USD) continued its losing streak for the third trading day. Market participants are expecting a trade war to break out especially between the United States (US) and China as the latter has retaliated against the 10% tariffs by imposing tariffs on a range of US exports, including farm equipment, some cars, and energy goods such as Coal and Liquefied Natural Gas (LNG).
With the rest of the world, investors expect U.S. President Donald Trump to use tariffs as a tool to gain a dominant position in negotiating deals with trading partners. President Trump’s delay in imposing 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, which will be released on Friday. This official employment data is expected to influence speculation regarding the Federal Reserve’s (The Fed) monetary policy guidance.