Euro Retreats After U.S. Criticism of Europe’s Economic Policy

Dollar Gains Modest Support, Pressuring the Euro

The euro fell against the U.S. dollar on Wednesday, with the EUR/USD pair sliding by about 0.4%, as the greenback recovered modestly. The move followed remarks by President Donald Trump indicating he would refrain from imposing tariffs on European goods linked to opposition against his efforts to acquire Greenland.


Lagarde’s Comments Offer Only Brief Relief

Earlier in the day, the single currency had found limited support after European Central Bank President Christine Lagarde said that any additional U.S. tariffs would have only a “minor” impact on inflation in Europe. She noted that a potential new round of tariffs from the Trump administration would have a “limited” direct effect on prices, emphasizing that the greater risk lies in the uncertainty created by repeated trade threats rather than the measures themselves.


Rate Expectations Remain Unchanged


Market expectations continue to point to policy stability at the European Central Bank. Traders are pricing in a 0.00% probability of a 25-basis-point rate hike at the ECB’s next meeting scheduled for February 5, reinforcing the view that monetary policy is likely to remain on hold in the near term.


Davos Incident Weighs on Sentiment

Sentiment toward the euro deteriorated later as developments at the World Economic Forum in Davos undermined earlier gains. Lagarde abruptly left a private dinner during the forum while U.S. Commerce Secretary Howard Lutnick was delivering a speech sharply critical of European economic policies.


Rising Transatlantic Tensions

The invitation-only event, hosted under the patronage of a prominent global investor and attended by senior figures, was cut short before dessert amid visible objections and early departures by several attendees. The episode highlighted growing strains between U.S. and European officials, contributing to renewed pressure on the common currency.