EUR/USD has declined sharply to around 1.0420 following US President Trump’s threats of imposing 25% tariffs on Eurozone imports. The strengthening US Dollar is attracting attention as market participants await upcoming economic data.
Recent statements from Trump confirm that tariffs on Canada and Mexico may take effect on March 4, with reciprocal tariffs on the Eurozone expected soon. The US Dollar Index (DXY) surged above 107.00 amid these developments.
Amid tariff concerns, the European Commission has stated its intention to respond firmly against unfair trade barriers. Economic vulnerabilities in the Eurozone may emerge, impacted by weak demand and ongoing political uncertainty in Germany.
Recent statistics revealed that US Durable Goods Orders increased by 3.1% in January, outperforming estimates. Additionally, Initial Jobless Claims reached 242,000, exceeding expectations of 221,000.
Traders are anticipating the January Personal Consumption Expenditures (PCE) data and further Eurozone inflation figures. The latter will influence the outlook for the European Central Bank’s monetary policy.
Technically, EUR/USD struggles to maintain levels above the 50-day Exponential Moving Average, with support around 1.0285 and resistance at the December high of 1.0630.
We are seeing the Euro take a hit, with the US Dollar pushing higher as Washington looks set to impose heavy tariffs on European imports. This has reinforced demand for the greenback, leaving traders with a sharp drop in EUR/USD to digest. Right now, all eyes are on upcoming economic indicators to determine whether these moves are going to hold or if a reversal may be on the cards.
Donald has doubled down on his stance, confirming that levies on Canada and Mexico are likely to come into force by early March. Although specific timing for Europe remains uncertain, the warning is loud enough. Markets are wasting no time in adjusting for the likelihood of retaliatory measures, which could unsettle trade further. In the midst of all this, the Dollar Index has shot above 107.00, highlighting the currency’s current strength.
Meanwhile, policymakers in Brussels are making it clear that they won’t simply stand by. The European Commission has already issued a strong response, warning that any unjustified tariffs will be met with equal force. Still, with political uncertainty lingering in Germany and weak demand acting as a drag, there are growing concerns that the bloc’s economy might struggle to absorb further pressure. Investors will need to keep an eye out for any additional signs of weakness over the coming weeks.
Over in the US, the economy continues to post robust data. The latest figures show Durable Goods Orders climbing 3.1% in January, a performance above what analysts had projected. Jobless claims also came in higher than expected at 242,000, suggesting some softening in the labour market but not enough to worry policymakers just yet. Overall, this gives the Federal Reserve more space to keep its monetary stance steady.
Looking ahead, the PCE inflation report for January is set to be a major focal point for traders. Any unexpected spike in price pressures could reinforce expectations that the Fed will keep rates elevated. Meanwhile, fresh consumer price data coming out of the Eurozone is another major piece of the puzzle. If inflation stays sticky on that side of the Atlantic, it may push the European Central Bank to maintain a firm stance on interest rates, despite broader economic struggles.
Technically, EUR/USD is having a tough time holding above the 50-day Exponential Moving Average, indicating that downward momentum remains intact for now. Support is visible near 1.0285, while the December peak of 1.0630 sits as a key resistance level. If the pair fails to stabilise soon, further declines could be in store. However, any shift in fundamentals might change the course of price action.
