EUR/USD bounced back from an intraday low of 1.0270 and rebounded near 1.0350 during the European session on Tuesday (February 4). The major currency pair found buying demand as US President Donald Trump's decision to delay tariffs on Canada and Mexico has reduced the safe-haven appeal of the US Dollar (USD).

The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, gave up its intraday gains and is trading at 108.44 at the time of writing, right on track to hit Monday's low of 108.40.

US President Trump suspended tariffs on his North American partners after they agreed to work together to stop the flow of fentanyl. On the other hand, the president's proposal to impose a 10% tariff on China is still on the table, and moreover, he has even suggested going further. "China will hopefully stop sending us fentanyl, and if they don't, the tariffs will be much higher," Trump said.

Meanwhile, China has responded swiftly to Trump's tariffs by imposing higher tariffs of 15% on Coal and Liquefied Natural Gas (LNG), and 10% on Crude Oil, farm equipment, and some cars.

Such a scenario suggests that the trade war will not spread to the rest of the world and will remain between the US and China, which has weighed on the demand for safe-haven assets.

On the economic front, the US Dollar will be guided by a series of economic indicators related to the labor market this week, such as the JOLTS Job Openings Data, ADP Employment Change and Nonfarm Payrolls (NFP), and the US ISM Services PMI figures.

The labor market data will influence market speculation about the Federal Reserve's (Fed) monetary policy outlook throughout the year. Currently, the Fed is in a wait-and-see mode until it sees "real progress in inflation or at least some weakness in the labor market." (Newsmaker)

Source: FXstreet