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Modest Gains Amid Holiday-Thinned Trading
The EUR/USD pair edged up by 0.18% on Friday, trading at 1.1778, despite thin market liquidity due to the U.S. Independence Day holiday, according to The Independent. The modest gain, which contributed to a weekly increase of 0.53%, came as investors grappled with escalating tensions over U.S. President Donald Trump’s sweeping tariff plans, set to take effect on August 1. The looming duties, ranging from 10% to 70% and targeting EU goods including food, have heightened concerns about a potential trade war, prompting cautious trading in the currency markets.
Tariff Threats and U.S. Legislative Moves
Trump’s administration announced it would begin issuing tariff declaration letters to countries, with around ten to twelve sent out on Friday and more expected in the coming days ahead of the July 9 deadline. The move follows the approval of a major U.S. legislative package, dubbed a significant bill, which extends 2017 tax cuts, boosts defense and immigration enforcement funding, but cuts health care, food assistance, and clean energy programs, adding $3.4 trillion to the national deficit over a decade. Meanwhile, reports indicate that European carmakers are pushing for tariff relief by pledging increased investments in the U.S., while EU negotiators are seeking concessions, including lower tariffs on pharmaceuticals, alcohol, semiconductors, and aircraft, alongside exemptions for cars, steel, and aluminum.
EU Data in Focus
With the U.S. economic calendar light due to the holiday, attention shifted to the European Union’s upcoming data releases. German factory orders for May disappointed, falling 1.4% month-on-month compared to a 1.6% expansion in April, though year-on-year figures showed a slight improvement, dipping from 5.8% to 5.3%. Looking ahead, traders are focused on next week’s EU economic docket, which includes German industrial production, retail sales for May, the Eurogroup meeting, and remarks from European Central Bank officials, all of which could influence the EUR/USD trajectory.
Market Sentiment and Outlook
Social media discussions on X highlighted the market’s unease, with one user describing the tariff announcements as “a storm cloud over global trade,” reflecting fears of volatility. Despite these concerns, the EUR/USD pair’s resilience suggests traders are cautiously optimistic, balancing tariff-related risks against expectations for EU economic indicators. As negotiations continue over the weekend, the currency pair remains poised for potential swings driven by trade developments and upcoming data.
