EUR/USD decreased by 0.25% following renewed tariff threats from US President Trump, who announced plans for a 25% tariff on European goods. These tariffs will join those proposed for Canada and Mexico, effective from April 2nd.

The volatility of the Euro increases as the list of nations not facing tariffs shrinks, amid fears of a trade war. Key US data is anticipated this week, including the GDP growth figures for the fourth quarter of 2024 and Durable Goods orders for January.

The US Personal Consumption Expenditure inflation report on Friday will be closely watched, with inflation indicators rising at the start of 2025. The EUR/USD pair remains above the 50-day Exponential Moving Average at 1.0450, although resistance is expected from the 1.0550 level.

The Eurozone includes 19 EU countries using the Euro, which is the second most traded currency globally, making up 31% of foreign exchange transactions in 2022. The European Central Bank manages monetary policy, influencing the Euro through interest rate adjustments.

Economic indicators such as GDP and the Trade Balance directly affect the Euro’s value. Stronger economic data typically strengthens the currency by attracting investment and prompting the ECB to raise interest rates, while weaker data may have the opposite effect.

This modest dip in the EUR/USD exchange rate means market sentiment is adjusting to broader trade concerns. With Donald Trump proposing 25% tariffs on European products, alongside measures targeting Canada and Mexico, the pressure on the Euro is mounting. These policies are set to take effect from April 2nd, narrowing the group of tariff-exempt nations. As a result, traders are recalibrating positions, aware that ongoing trade tensions may lead to larger market swings.

Looking ahead, all eyes will be on upcoming US economic reports that could influence currency pairs. Fourth-quarter GDP figures and January’s Durable Goods orders will provide more clues about the strength of the US economy. If economic growth remains robust, the US dollar may find more support, keeping the Euro under pressure.

Friday’s Personal Consumption Expenditure inflation report is another key event, given that earlier data has already pointed to rising inflation as 2025 begins. Should inflation come in hotter than expected, it could fuel more speculation that the Federal Reserve may remain firm on interest rates. That, in turn, would make dollar-denominated investments more attractive, reinforcing the downward pressure on the Euro.

From a technical perspective, the EUR/USD pair is holding above the 50-day Exponential Moving Average, currently at 1.0450. However, there is strong resistance around 1.0550. If the pair struggles to break above this level, it may signal further downside momentum in the near term.

Given that the Euro is the world’s second most traded currency, structural considerations also play a role in price movements. In 2022, it accounted for 31% of total foreign exchange transactions, reinforcing its global importance. The European Central Bank remains a central force in determining the value of the Euro, especially through interest rate decisions. If economic conditions support a more hawkish stance, we might see some support for the currency. Conversely, weaker indicators could renew downward pressure.

Economic performance still holds weight in the bigger picture. Stronger trade balances and GDP growth tend to attract investors, which can lift the currency and possibly drive the ECB to adjust rates accordingly. On the other hand, weaker figures can deter buyers, increasing the odds of further declines.

For traders focusing on derivative markets, these upcoming reports may set the tone for volatility levels. Any deviations from forecasts could trigger abrupt price swings, influencing both short-term trading strategies and longer-term positioning. Being prepared for shifts in momentum will be key.