Title: EUR/USD turns sideways around 1.0280 as US-China tensions on Taiwan escalate

August 2, 2022 01:28 AM ET

By: AnalysisWatch

The EUR/USD pair is moving back and forth in a narrow range of 1.0261-1.0283 in early European trading.

The pair has come under selling pressure above 1.0280 and is expected to remain volatile as market sentiment is expected to deteriorate due to escalating tensions between the US and China ahead of US House of Representatives Speaker Pelosi's arrival in Taiwan.

Market sentiment is turning negative as China's threats to Pelosi's personal security in the event of her visit to Taiwan could exacerbate global tensions. In addition, news that several Chinese warplanes flew near the centerline of the Taiwan Strait on Tuesday morning (Reuters) increased risk appetite in the global market.

Meanwhile, the U.S. dollar index (DXY) moved sideways after a less confident rally. The DXY marked a new three-week low of 105.05 this morning in anticipation of weak U.S. Nonfarm Payrolls (NFP) data.

According to market expectations, the U.S. economy added 250,000 jobs in July. Many large technology companies in the U.S. have suspended the hiring process for a while, the multiplier effects of which could be reflected in the payroll data.

In the eurozone, investors are waiting for the release of retail sales. A preliminary estimate for retail sales in the eurozone is 1.7%, extremely lower than the previously published 0.2%. Households in Europe are facing the headwind of higher price pressure, which is forcing them to increase their consumer spending despite a slight change in the volume of purchases. As a result, retail sales are likely to be higher. And a lower estimate of economic demand points to a serious decline in retail demand