After a short-lived rally to one-month highs around 1.1160 yesterday, EURUSD trimmed gains and has settled below the 1.11 handle on Thursday. The euro remains bid but lacks the upside impetus to see sustainable gains as risk trends look unstable.
Risk sentiment improved substantially on Wednesday, with reports of a progress in the US-China talks fueling demand for high-yielding assets including the common currency. But to see further gains, risky assets need to see the details of the possible phase one deal ahead of the December 15 deadline. So traders will continue to closely monitor further developments on this front and further pick up in volatility in general could result in similar aggressive movements for the EURUSD pair.
Of note, the euro was nearly unfazed by another disappointing economic report out of Germany. Factory orders contracted 0.4% in October versus +0.4% expected. So the release just added to more concerns over the state of the Europe’s largest economy in the fourth quarter. The lack of reaction from the euro confirmed that traders are entirely focused on trade-related headlines.
Also, markets will shift focus on the key jobs data out if the United States due on Friday. As usual, traders will thoroughly asses both employment numbers and wages data. Should the general picture come on a positive side, the euro’s bullishness could abate.