- The EUR/USD bounces about 1,0780 while the US dollar corrects despite the fact that US president Trump threatens to impose large -scale tariffs on the Eurozone and Canada.
- Trump has imposed a 25% tax on imports of all automotive cars and components.
- Investors expect the US PCE inflation data, which will be published on Friday.
The EUR/USD lifts around 1,0770 in the European negotiation hours on Thursday. The main currency pair wins after a six -day run, since the US dollar index (DXY) goes back from its maximum of three weeks of 104.65. The prospects for the euro (EUR) become fragile since the US president Donald Trump has threatened to impose large -scale tariffs on Canada and the Eurozone for devising plans to damage the US economy.
“If the European Union (EU) works with Canada to do economic damage to the US, large -scale tariffs will be imposed, much greater than those currently planned, to protect the best friend that each of those two countries has ever had,” Trump said in a publication in Truth Social.
The scenario has raised fears of a terrifying commercial war between the Eurozone and the US, which would result in an economic deceleration in both countries.
After the threats of Trump’s large -scale tariffs, the policy head of the European Central Bank (ECB) and governor of the Belgian Central Bank, Pierre Wunsch, said in his interview with CNBC that the tariffs would be harmful to economic growth and increase inflationary pressures. “The risks of inflation could be upwards,” Wunsch said, but ruled out the probability of an increase in interest rates this year. Wunsch added, “a pause in the rate cut in April should be on the table.” On the contrary, operators have become increasingly confident that the ECB could reduce interest rates again at the April meeting amid the growing economic risks of the commercial war led by Trump.
Earlier on the day, Donald Trump announced 25% tariffs on imports of automotive cars and components, which will enter into force on April 2. The German economy will be one of the main victims of Trump’s tariffs on cars, as it sends 13% of its total car exports to the US.
What moves the market today: the EUR/USD is recovered at the expense of the US dollar
- The EUR/USD bounces after correcting in the last six negotiation sessions. The torque attracts offers while the US dollar (USD) corrects even though President Donald Trump imposes tariffs on cars imports. Market participants expect the impact of the Trump tariff agenda to also be unfavorable for the short -term domestic economy.
- The impact of expensive products that enter the US will be supported by importers, who will have no choice but to transfer them to consumers. Such scenario will be inflationary to the economy, which will reduce the purchasing power of households.
- Trump’s tariff policies have complicated the work of the Federal Reserve (FED). The Fed would be in an act of balance, since the possibility of greater inflation could force the Central Bank to maintain a restrictive monetary policy position, and the fears of a slower economic growth boost the need for an expansive policy. The president of the Bank of the Federal Reserve of Minneapolis, Neel Kashkari, said at the economic summit of the Detroit Lakes Commerce on Wednesday that, together, those forces are “more or less a balance.” He indicated that the Fed should “simply stay where we are for a prolonged period until we obtain clarity.”
- According to the CME Fedwatch tool, the Fed is sure of maintaining stable interest rates in the current range of 4.25% -4.50% at the May policy meeting, but sees 65.5% probability of a reduction in June.
- Looking ahead, the main trigger for the US dollar will be the US Personal Consumption Expenditure Index (PCE) for February, which will be published on Friday. Economists expect the underlying inflation of the US PCE, which is the inflation indicator preferred by the Fed, has grown at a faster rate of 2.7% year -on -year, compared to the increase of 2.6% observed in January.
Technical analysis: EUR/USD finds support after reaching a new minimum of three weeks about 1,0730
The EUR/USD attracts offers after registering a new minimum of three weeks about 1,0730, which coincided with the 20 -day exponential mobile (EMA) average earlier in the day.
The 14 -day relative force index (RSI) cools below 60.00, suggesting that the bullish impulse is over, but the upward trend remains intact.
Looking down, the maximum of December 6, 1,0630 will act as the main support zone for the torque. On the contrary, the psychological level of 1.1000 will be the key barrier to the euros of the euro.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
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Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
