Euro briefly above $1.13 after French PMI data, US-China trade deal back in focus


LONDON: The euro and other currencies were higher on Tuesday after White House trade adviser Peter Navarro said his comments that the trade deal with China was “over” were taken out of context. The common currency got a boost by French business activity rebounding more than expected in June, returning to growth after three months of an unprecedented downturn.
Navarro said on Monday the trade deal with China “continues in place”, walking back on his earlier remarks that the pact was “over”, stoking volatility in markets already frazzled by the coronavirus pandemic.
Navarro said his comments were taken “wildly out of context”, while U.S. President Donald Trump said in a tweet the deal with the China was “fully intact”.
The Australian dollar rose to a one-week high, having fallen earlier, and the safe-haven Japanese yen slipped to a six-day low as a result.
“We expect limited further fallout, with President Trump expected to remain committed to the phase one trade deal in the run up to the election,” said Lee Harman, currency analyst at MUFG.
“However, last night’s price action does highlight that the FX market remains sensitive to trade policy uncertainty. It remains a potential trigger for higher volatility,” he said.
Euro overnight volatility rose to nearly 10%, the highest in nearly three weeks.
The wild swings in currencies come as the market is also torn between hopes of economic re-opening in many parts of the world and signs coronavirus infections are rising in the United States.
The Australian dollar traded up 0.3% at 0.6928, after rising to 0.6935, highest since June 16. Before that, it had fallen as much as 0.7%.
The offshore Chinese yuan pared much of its earlier losses to trade at 7.0669 per dollar in the offshore market, up 0.2% on the day.
The safe-haven Japanese yen fell 0.2% to 107.10 against the greenback.
The euro rose 0.3% to $1.1306, a one-week high.
“There was also a brief flurry of U.S. dollar demand between 2 a.m. and 3 a.m. London time that dragged euro/dollar to a low of $1.1233, but U.S. dollar strength pored short-lived,” Hardman said.
Elsewhere, Scandinavian currencies rebounded as well, with the Norwegian crown rallying more than 1% against the dollar and by 0.7% versus the euro.