EUR/USD retreats as tariff concerns spark safe-haven demand
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The EUR/USD pair slipped to 1.0450 in Monday's European session, retreating from a six-week high of 1.0520 recorded on Friday. The pair's downward correction reflects strengthening demand for the US Dollar amid growing market caution triggered by tariff fears and key central bank policy meetings later this week.
Market Sentiment Turns Cautious
The US Dollar gained traction following President Donald Trump's imposition of 25% tariffs on Colombia after disagreements over deportation policies. Although the White House later announced the suspension of tariffs following Colombia’s agreement, the uncertainty bolstered safe-haven demand for the Greenback. Additionally, markets are bracing for the Federal Reserve and European Central Bank policy decisions, further intensifying risk aversion.
Central Bank Policy in Focus
The Federal Reserve is expected to maintain its benchmark rate within the 4.25%-4.50% range on Wednesday. Attention will center on Chair Jerome Powell’s comments, particularly regarding Trump’s recent calls for immediate rate cuts. The ECB, meanwhile, is widely anticipated to reduce its Deposit Facility Rate by 25 basis points to 2.75%, marking its fourth consecutive cut. Market participants will closely monitor ECB President Christine Lagarde’s press conference for insights into how the bank plans to address the economic impact of Trump’s tariffs on the Eurozone.
Technical Outlook
EUR/USD finds support near 1.0450, trading around the 50-day Exponential Moving Average at 1.0460. Despite the correction, the pair’s near-term outlook remains bullish, underpinned by a rebound from the January 6 high of 1.0437. The 20-day EMA at 1.0383 further reinforces this support zone.
On the downside, the January 20 low at 1.0266 is a critical support level. Conversely, resistance lies near the December 6 high of 1.0630, which represents a key barrier for Euro bulls aiming to extend the recent uptrend.
Outlook and Key Events
As investors await durable goods orders and Q4 GDP data from the US, alongside Eurozone GDP and inflation figures, EUR/USD is likely to remain volatile. The interplay between Trump’s tariff policies and central bank actions will continue to shape market dynamics in the days ahead.
Market Sentiment Turns Cautious
The US Dollar gained traction following President Donald Trump's imposition of 25% tariffs on Colombia after disagreements over deportation policies. Although the White House later announced the suspension of tariffs following Colombia’s agreement, the uncertainty bolstered safe-haven demand for the Greenback. Additionally, markets are bracing for the Federal Reserve and European Central Bank policy decisions, further intensifying risk aversion.
Central Bank Policy in Focus
The Federal Reserve is expected to maintain its benchmark rate within the 4.25%-4.50% range on Wednesday. Attention will center on Chair Jerome Powell’s comments, particularly regarding Trump’s recent calls for immediate rate cuts. The ECB, meanwhile, is widely anticipated to reduce its Deposit Facility Rate by 25 basis points to 2.75%, marking its fourth consecutive cut. Market participants will closely monitor ECB President Christine Lagarde’s press conference for insights into how the bank plans to address the economic impact of Trump’s tariffs on the Eurozone.
Technical Outlook
EUR/USD finds support near 1.0450, trading around the 50-day Exponential Moving Average at 1.0460. Despite the correction, the pair’s near-term outlook remains bullish, underpinned by a rebound from the January 6 high of 1.0437. The 20-day EMA at 1.0383 further reinforces this support zone.
On the downside, the January 20 low at 1.0266 is a critical support level. Conversely, resistance lies near the December 6 high of 1.0630, which represents a key barrier for Euro bulls aiming to extend the recent uptrend.
Outlook and Key Events
As investors await durable goods orders and Q4 GDP data from the US, alongside Eurozone GDP and inflation figures, EUR/USD is likely to remain volatile. The interplay between Trump’s tariff policies and central bank actions will continue to shape market dynamics in the days ahead.