EUR/USD appreciates as investors grow alarmed by fresh tariff threats

Although the EUR/USD recovers some of its intraday losses and closes to 1.0300, the picture remains murky due to fresh concerns over US President Trump’s tariffs. President Trump of the United States is about to impose 25% tariffs on all imports of steel and aluminum.

On Tuesday and Wednesday, investors look forward to Fed Powell’s testimony. After a shaky opening at 1.0280 in Monday’s North American session, EUR/USD rises to about 1.0300, but at the time of writing, it is still down 0.17%. Due to increasing concerns about tariffs by US President Donald Trump, investors fled to the safe-haven fleet, causing the main currency to open weakly. The US Dollar Index (DXY), which compares the value of the US dollar to six other major currencies, gives up some

President Trump vowed over the weekend to impose reciprocal tariffs on countries where he observed unfair trade practices, in addition to raising 25% taxes on steel and aluminum imports. Canada, the top supplier of aluminum to the US, is predicted to suffer the most from Trump’s decision to impose 25% tariffs on metals. Leading exporters to the US, like Mexico, Brazil, Vietnam, and South Korea, will also be affected by the strain of increased metals taxes.


The Eurozone, which imposes 10% tariffs on US auto imports and pays 2.5% import duties on domestic automobiles delivered to it, is predicted to suffer greatly from reciprocal tariffs. The already precarious Euro (EUR) will not benefit from such a situation.

Given that “Europe is target-rich,” some analysts cautioned last week that a US tariff bomb would probably find “fertile ground in the EU,” quickly turning unsolved disputes into trade conflicts.

A few policymakers have cautioned that the Eurozone economy is not robust enough to sustain inflation at 2%, and the ECB may have to lower interest rates below the neutral rate as it prepares to continue lowering them.


According to ECB economists, the bank’s so-called neutral rate is likely to fall between 1.75% and 2.25%.

Regarding economic data, Eurozone Sentix Investor Confidence rises from -17.7 in February to -12.7. The sentiment data shows how the market feels about the state of the economy right now and what they anticipate happening in the future.
As the US Dollar (USD) gives up some of its intraday gains, EUR/USD recovers. Nonetheless, the US dollar’s outlook is still stable, with increased expectations that the Fed would maintain interest rates in the current range of 4.25% to 4.50% for the duration of the year.

Nonetheless, strategists predict that the fed funds rate will not alter in 2025 and will continue to hover between 4.25 and 4.5%. In March or May, they had previously suggested that there would only be one further 25 bps cut. Analysts have revised their predictions for the Fed’s monetary policy stance in the wake of the release of the January Nonfarm Payrolls (NFP) data, which showed a favorable reading for the US.

According to the US NFP data, the economy created 143K jobs in January, which was less than the 307K jobs that were generated in December—which were revised up from 256K jobs. A “steeper trend acceleration” is indicated by increased adjustments to recent payroll months, according to Macquarie analysts.

In the meantime, the unemployment rate dropped to 4% from 4.1% in the previous publication and estimates. Surprisingly, average hourly earnings increased at a strong rate of 0.5% per month and accelerated to 4.1% per year.
The Consumer Price Index (CPI) data for January, which is scheduled to be announced on Wednesday, will be the primary catalyst for the US dollar this week. Additionally, Fed Chair Jerome Powell’s speech before Congress on Tuesday and Wednesday will be closely watched by investors.