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EUR/USD: the euro’s winning streak set to end as US-China tensions ramp up

EUR/USD finished Asian trade on Monday under downside pressure at $1.093, as capital flows moved back into safe-haven assets amid another round of risk-off appetite.

EUR/USD facing downside pressure to start the week

The euro lost ground on Monday, and was trading near session lows just above the $1.093 level in early morning UK trade.

EUR/USD continued its three-day winning streak into the Friday close on global markets, after the breakdown in support for the USD which saw the greenback lose ground against most of the major pairs.

The bullish momentum saw EUR/USD push towards the $1.10 mark for the first time since 31 March, as it threatened to break out of its April trading wedge between $1.07 and $1.10.

However, a renewed round of tension between the US and China over the weekend put a dampener on risk appetite during Asian trade on Monday.

In an interview that aired on Sunday night, US president Donald Trump again turned up the heat on the world’s second largest economy, promising the US would soon release a 'very conclusive report' about China’s role in the spread of the Covid-19 pandemic.

Along with the euro, AUD/USD and GPB/USD also fell sharply as capital flows moved back into safe-haven currencies, while the Chinese yuan slipped to a six-week low.

US government ratchets up tensions against China

Amid the broader risk-off sentiment to start the week, futures markets for London’s FTSE Index and the S&P 500 were both pointing to modest falls on Monday, while stocks on the major European exchanges are expected to open sharply lower.

Oil prices also opened the week sharply lower as US WTI crude fell by more than 3%.

And combined with a renewed round of US-China tensions, risk-off sentiment has again pervaded markets across multiple asset classes.

Prior to Trump’s comments to US media on Sunday night, US secretary of state Mike Pompeo also said there was 'enormous evidence' that the Covid-19 virus was initially developed in a Wuhan laboratory.

President Trump said US tariffs would be the 'ultimate punishment' on China, adding that the US will pull out of its trade deal if China doesn’t buy US goods.

A short time ago, the US Dollar Index was trading at session highs near 99.40, as the greenback offset some of last week’s declines against the major trading pairs.

Looking at the day ahead, German manufacturing PMIs for April are due out in the European session, and a forecast to remain subdued below a reading of 35.

Key data this week will be led by US employment figures, with ADP payrolls for April due out on Wednesday followed by benchmark non-farm payroll data on Friday.

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