The dollar slipped against the euro on Tuesday after a better-than-expected German economic sentiment survey boosted the common currency even as continued uncertainty about the outlook for U.S.-China trade talks kept large moves in the FX market in check.
The euro was 0.16% higher at $1.108 after the ZEW research institute’s monthly index on economic morale among German investors showed the mood improved far more than forecast in December, with an unexpected rise in October exports boosting hopes for an upturn in Europe’s biggest economy.
“The current assessment remains deeply in negative territory but did improve and beat expectations,” he said.
The boost to the euro from the survey was unlikely to significantly change the euro’s direction against the greenback, John Doyle, vice president of dealing and trading, at Tempus Inc in Washington, said.
The common currency is down about 3.4% against the dollar this year.
Currency market moves on Tuesday were fairly muted as investors awaited developments from central bank meetings in the United States and Europe and as a Dec. 15 deadline for the next wave of U.S. tariffs on Chinese goods fed caution in global markets.
Investors are almost certain the Federal Reserve will leave rates unchanged when its two-day meeting ends on Wednesday, while the European Central Bank is likewise expected to keep interest rates steady on Thursday.
Investors were also awaiting the outcome of Britain’s general election on Thursday.
“Overall we are in wait-and-see mode for the dollar,” Tempus’ Doyle said.
“Central bank meetings and the UK election are the biggest risk events this week so we see volatility picking up a touch starting tomorrow afternoon,” he said.
U.S.-China trade talks remain in flux with little certainty about whether Washington will impose a new round of U.S. tariffs on Chinese consumer goods if the two countries are unable to agree on a limited trade deal by December 15.
The dollar was little changed versus the safe-haven Japanese yen at 108.58 yen.
The Chinese yuan – the currency most sensitive to the U.S.-China trade war – was little-changed against the U.S. dollar in the offshore market, last at 7.0313.
Sterling rose 0.24% against the dollar cementing recent gains as traders shrugged off weak economic growth data and kept an eye on the final days of campaigning before Britain’s general election on Thursday.
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