Euro gains ground after disappointing reaction to Trump's tariffs

The Euro rose to $1.05 after hitting two-year lows earlier in the month, though investors remain cautious due to ongoing economic challenges in Europe and growing concerns about the potential impact of a second Donald Trump administration.

Euro gains ground after disappointing reaction to Trump's tariffs

Trump reiterated his threats to raise tariffs, including a 10% increase on Chinese imports and a 25% hike on goods from Mexico and Canada. He also warned of significant tariffs on European products, especially cars, stating that the EU would "pay a big price." These threats add to the difficulties facing Europe’s struggling manufacturing sector. This grim outlook has led investors to increase their expectations for aggressive monetary easing by the ECB. While a 25 basis point rate cut next month is already priced in, the likelihood of a larger 50 basis point cut has risen to 58%.

Eyes on inflation numbers

Preliminary inflation data for the Euro Area, set for release this week, will be closely watched and could provide further clues on the size of the ECB’s upcoming rate cut.