Risk-off sentiment has ebbed on Thursday as global investors received a hope for de-escalation in the trade war between the US and China as the two countries will hold trade talks in late August. Against this backdrop, the dollar safe-haven demand has abated, which opened the way to a recovery in major currencies.
However, markets remain rather cautious and refrain from euphoria as they remember the previous talks in May – after the discussions, Trump has escalated the trade conflict in June. So traders beware of the same scenario, though a chance for easing of the tensions somehow improves market sentiment.
As such, the greenback could get under more pressure in coming days should investors continue to switch to a risk-on mode. Further recovery in the Turkish lira adds to the amore positive sentiment in the global financial markets.
On the other hand, euro and pound upside potential will remain limited as there are still concerns over the Turkish risks and Brexit developments, respectively. In the short-term, EURUSD needs to regain the 1.14 threshold in order to set the scene for further recovery.
By Helen Rush
Senior Analyst at Capital Markets