Euro Rallies on Risk-On Sentiment, Later Declines as Markets Cool Off

The  euro today rallied higher against the  US dollar during the  Asian session mainly due to the  risk-on sentiment following the  US-China trade truce. The  euro later declined in  the  early European session as  market sentiment became neutral and  the  EUR/USD currency pair moved into negative territory.
The  EUR/USD currency pair today rallied to  a  high of  1.1378 before dropping to  a  daily low of  1.1318, but had retraced most of  its losses at  the  time of  writing.
The  currency pair’s initial rally was triggered by  the  risk-on sentiment that pervaded the  markets after the  ceasefire in  trade hostilities announced by  the  US and  China on  Saturday. According to  the  White House, President Donald Trump and  Chinese leader Xi Jinping agreed not to  impose any further tariffs on  exports for  90 days as  they worked towards an expedited trade deal. Investors reacted positively to  the  news, which led to  a  large outflow of  funds from safe haven currencies such as  the  US dollar into riskier currencies such as  the  euro.
The  pair headed lower in  the  early European session despite the  release of  positive manufacturing PMI data from Germany, France and  the  eurozone by  IHS Markit; all the  three prints beat consensus estimates. The  pair later rallied higher in  the  early American session despite the  release of  positive US ISM employment and  manufacturing PMI data.
The  pair’s future performance is likely to  be affected by  geopolitical events given the  lack of  major releases from the  European and  American dockets tomorrow.
The  EUR/USD currency pair was trading at  1.1357 as  at  16:19 GMT having recovered from a  low of  1.1318. The  EUR/JPY currency pair was trading at  128.96 having risen from a  low of  128.52.

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