EUR/USD remains depressed on trade uncertainty lukewarm German data

The Euro hovers near recent lows with upside attempts capped below 1.1600.
Risk appetite remains subdued as trade tensions between the US and China flare up.
German ZEW data revealed that the economic sentiment improved less than expected in October.

EUR/USD holds losses for the second consecutive day on Tuesday, trading right below 1.1560 after having retested two-month lows at 1.1542 earlier on the day. A risk-off mood on concerns of a Sino-US trade war is keeping the Euro (EUR) on the back foot, and the German ZEW Economic Sentiment Index has failed to cheer investors.

News that China and the United States have raised their fees on each other’s vessels has reactivated concerns about a trade war between the world’s two major economies on Tuesday. This has dampened previous hopes of a de-escalation, following US Treasury Secretary Scot Bessent’s announcement on Monday of an upcoming meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping.

In Germany, the ZEW Economic Sentiment Index has shown a moderate im¡provement in October, but is still short of the market expectations, while the sentiment about the current economic situation deteriorated to its lowest levels since May. Somewhat earlier, Destatis figures confirmed that German consumer inflation accelerated to 2.4% in September from 2.2% in August, in line with the preliminary reading. The Euro (EUR) edges lower following the data release.

The US economic docket remains thin, amid a data blackout from the US federal government. Still, Federal Reserve (Fed) Chairman Jerome Powell will speak later today. However, in the absence of hard data to contextualize his comments, he is unlikely to alter market expectations of two interest rate cuts by the central bank in the next two meetings.