The euro is progressing as the optimism of trade talks between the US and China reinforces sentiment By Reuters

By Tommy Wilkes

LONDON (Reuters) – The euro has rebounded and riskier currencies such as the Australian dollar strengthened on Monday, as optimism sparked by the breakthrough of the US-China trade war encouraged investors.

The euro has been stuck in a trading range against the dollar for several months as the weakening economy of the euro zone has offset lower expectations, the Federal Reserve will raise US interest rates this year again .

But after falling to its lowest level in three months on Friday, the euro has recovered, helped by improving investor confidence as the hope of ending the conflict trade between the United States and China increased, after both parties reported progress in the negotiations.

The dollar, the most liquid currency in the world, tends to behave well when investors are worried.

"In general, the outlook for trade remains positive," said Adam Cole, a currency analyst at RBC Capital Markets, adding that he thought the climate of "risk" would linger.

"If anything, we would do it with You have a pretty decent growth story and a Fed that puts rates on hold."

However, he said that a better way to play with the Fed's rate hikes was in dollars / yen, as more and more Japanese investors choose not to hedge the company's purchases. 39, dollar-denominated assets that are already generating a decent return after rising US rates in 2018.

According to Cole, the dollar / yen should reach 120 yen per dollar by the end of 2019, compared to the current 110.55.

The euro climbed 0.3% to 1.1332 dollars, while the US, which measures the US unit against a basket of rivals, fell 0.2% to 96.687 in a calm session with US markets closed Monday.

Despite Monday's gains, traders are banking on a weaker euro in the coming months. They expect the European Central Bank to maintain its loose monetary policy in a context of slow growth, low inflation and political uncertainty.

Analysts at Commerzbank (DE 🙂 said the single currency also remained vulnerable to any outbreak of a trade dispute between the United States and Europe.

"There would be very little to report on the positive side of the euro if the conflict worsened.The smallest economic disruption would undoubtedly be damaging for the euro given the fragility of the euro. the economy of the euro zone, "they wrote.

The Australian dollar, considered a barometer of the global risk climate, rose 0.2% to 0.7154 USD.

The British pound rose 0.3% to $ 1.2918, up from last month's low of last week as investors waited for the outcome of negotiations between Britain and the United States. the European Union, London trying to convince Brussels to change its withdrawal agreement.

Emerging market currencies were mixed.