EUR/USD rebounds but remains fragile amid Trump’s tariff threats
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EUR/USD recovered from intraday losses on Monday, climbing above 1.0300, yet market sentiment remains cautious as investors weigh the impact of president donald trump’s proposed 25% tariffs on steel and aluminum imports.
Tariff concerns and market reaction
President Trump reiterated his commitment to imposing higher tariffs on metals and reciprocal duties on countries engaging in what he considers unfair trade practices among the most affected economies could be Canada, Mexico, Brazil, Vietnam, and South Korea, key exporters of steel and aluminum to the U.S. The eurozone is particularly vulnerable, as it imposes a 10% tariff on U.S. automobile imports, while european automakers pay only 2.5% to access the U.S. market the Euro remains under pressure as these tariffs could escalate into a broader trade war, exacerbating the eurozone’s economic slowdown and weak inflation outlook. Macquarie analysts have warned that Trump’s tariffs could find "fertile ground in the EU", rapidly escalating trade disputes that have remained unresolved.
Monetary policy outlook: ECB and FED
Investors are closely watching ECB President Christine Lagarde’s speech at the European Parliament later today with the eurozone economy struggling, several ECB policymakers have suggested that the Central Bank may need to cut interest rates below the neutral rate. Meanwhile, expectations for a Federal Reserve rate cut have been scaled back after stronger-than-expected U.S. nonfarm payrolls data.
Key labor market data
Nonfarm payrolls increased by 143k jobs in January, down from 307k in December (revised up from 256k); unemployment rate fell to 4.0% from 4.1%; average hourly earnings surged 0.5% m/m, pushing annual wage growth to 4.1%. Macquarie strategists now predict no FED rate cuts in 2025, revising their prior forecast of a single 25 bps cut in March or May.
Market focus: CPI data and Powell testimony
FED chair Jerome Powell’s testimony before congress on Tuesday and Wednesday could provide more clarity on interest rate policy; U.S. consumer price index (CPI) for January will be released on Wednesday, heavily influencing FED policy expectations.
Technical outlook: Euro remains pressured
EUR/USD is struggling near 1.0300, after facing resistance at the 50-day EMA at 1.0436 last week; 14-day RSI remains in a neutral 40-60 range, indicating a sideways trend; key support levels at 1.0177 (January 13 low) and 1.0100 (round number support); key resistance level at 1.0500, a major psychological barrier for Euro bulls. The Euro-Dollar pair remains vulnerable, with further downside possible if tariff escalations and FED hawkishness weigh on sentiment.
Tariff concerns and market reaction
President Trump reiterated his commitment to imposing higher tariffs on metals and reciprocal duties on countries engaging in what he considers unfair trade practices among the most affected economies could be Canada, Mexico, Brazil, Vietnam, and South Korea, key exporters of steel and aluminum to the U.S. The eurozone is particularly vulnerable, as it imposes a 10% tariff on U.S. automobile imports, while european automakers pay only 2.5% to access the U.S. market the Euro remains under pressure as these tariffs could escalate into a broader trade war, exacerbating the eurozone’s economic slowdown and weak inflation outlook. Macquarie analysts have warned that Trump’s tariffs could find "fertile ground in the EU", rapidly escalating trade disputes that have remained unresolved.
Monetary policy outlook: ECB and FED
Investors are closely watching ECB President Christine Lagarde’s speech at the European Parliament later today with the eurozone economy struggling, several ECB policymakers have suggested that the Central Bank may need to cut interest rates below the neutral rate. Meanwhile, expectations for a Federal Reserve rate cut have been scaled back after stronger-than-expected U.S. nonfarm payrolls data.
Key labor market data
Nonfarm payrolls increased by 143k jobs in January, down from 307k in December (revised up from 256k); unemployment rate fell to 4.0% from 4.1%; average hourly earnings surged 0.5% m/m, pushing annual wage growth to 4.1%. Macquarie strategists now predict no FED rate cuts in 2025, revising their prior forecast of a single 25 bps cut in March or May.
Market focus: CPI data and Powell testimony
FED chair Jerome Powell’s testimony before congress on Tuesday and Wednesday could provide more clarity on interest rate policy; U.S. consumer price index (CPI) for January will be released on Wednesday, heavily influencing FED policy expectations.
Technical outlook: Euro remains pressured
EUR/USD is struggling near 1.0300, after facing resistance at the 50-day EMA at 1.0436 last week; 14-day RSI remains in a neutral 40-60 range, indicating a sideways trend; key support levels at 1.0177 (January 13 low) and 1.0100 (round number support); key resistance level at 1.0500, a major psychological barrier for Euro bulls. The Euro-Dollar pair remains vulnerable, with further downside possible if tariff escalations and FED hawkishness weigh on sentiment.