LONDON (Reuters) – The euro held at a three-day high on Thursday as concerns about a global trade war eased after the United States and the European Union agreed to begin talks on lowering tariffs.
Following talks on Wednesday with European Commission President Jean-Claude Juncker, U.S. President Donald Trump said they had agreed to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.”
However, the moves in the single currency EUR=EBS was far more subdued than equities, where auto stocks surged 2 percent, and bond yields edged higher as investors waited for the fine print to emerge on the trade discussions.
“The one thing we have learned from the last 18 months of Trump’s gyrating trade policies is that whatever looks certain today is likely to be undermined tomorrow,” Gavekal strategists said in a note.
“The Trump-Juncker pact is a welcome respite, but not yet a cause for celebration.”
The euro was up 0.1 percent at $1.1738 EUR=EBS, extending its rise after gaining 0.4 percent the previous day. Before the Trump-Juncker talks, the single currency slipped to a low of $1.1664.
The immediate focus for currency markets was the European Central Bank’s policy decision due later on Thursday where investors will study comments by President Mario Draghi for any further hints on the pace of policy normalization.
However, another leg down on the Chinese currency after yesterday’s bounce undermined broader risk appetite in the markets. The Chinese yuan CNH=D3 fell half a percent to 6.79.
A more than 6 percent drop in the value of the Chinese currency against the dollar since mid-June as trade tensions escalated has put pressure on export-oriented emerging markets.
Investors increased bearish positions over the past two weeks on all emerging Asian currencies, according to a Reuters poll.
Elsewhere, the dollar index .DXY held at a two-week low against a basket of six major currencies and was down 0.25 percent at 94.131.
Sterling GBP=D3 was broadly steady at $1.3202 as expectations about a rate hike next week from the Bank of England underpinned the British currency.
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