EUR/USD stability amid tariff uncertainty and german fiscal strength
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The euro is expected to remain relatively stable for the next two to three months despite potential trade pressures, largely thanks to auto dealers who have stocked enough inventories to cushion the impact of new tariffs. The White House has not made its position on the April 2 deadline clear, and many analysts believe the current uncertainty will extend as President Trump could introduce additional deadlines, postponing a final decision on the 25% auto tariffs. The resulting delay provides the European economy time to absorb shocks and offers support to EURUSD around the 1.08 level.
Bloomberg predicts that these tariffs, if enacted, could shave 0.5% off Germany’s GDP, yet the country stands on firmer ground than headlines suggest. The auto sector constitutes a vital part of its exports, but Germany has also implemented a fiscal stimulus package of roughly €1 trillion under Friedrich Merz’s leadership, aimed at mitigating any downturn from prolonged trade wars. Without tariffs, German GDP could see modest gains of 0.2% in 2025 and 1.1% in 2026, though skeptics wonder whether the economy might still face a third year of recession. Such concerns are weighed against growing sentiment that fiscal policy will lessen trade-war damage while a slowing US economy limits downside risks for the euro.
Morgan Stanley estimates that US car prices could jump by 11–12% if protectionist measures intensify, a scenario that Boston Fed President Susan Collins warns would be inflationary. These developments leave the Federal Reserve little room for accommodative rate cuts, reinforcing the notion that the dollar might become a “toxic currency” if further protectionism dampens economic activity. Investors holding EURUSD positions see this dynamic as a buffer, with auto dealers’ inventories offering at least two or three months of breathing room. During this window, the euro could benefit from renewed appetite for less vulnerable currencies.
The trading plan of buying EURUSD remains viable if the pair continues to hold the 1.0735–1.0755 range and eventually rises above 1.082. A steady push beyond that threshold could unlock more upside as traders anticipate longer delays or softening rhetoric on tariffs. While such positions carry heightened risk under unpredictable policy decisions, market history has shown that periods of political gridlock and shifting deadlines can create significant short-term opportunities for gains, especially when underscored by a resilient fiscal backdrop in Europe.
Bloomberg predicts that these tariffs, if enacted, could shave 0.5% off Germany’s GDP, yet the country stands on firmer ground than headlines suggest. The auto sector constitutes a vital part of its exports, but Germany has also implemented a fiscal stimulus package of roughly €1 trillion under Friedrich Merz’s leadership, aimed at mitigating any downturn from prolonged trade wars. Without tariffs, German GDP could see modest gains of 0.2% in 2025 and 1.1% in 2026, though skeptics wonder whether the economy might still face a third year of recession. Such concerns are weighed against growing sentiment that fiscal policy will lessen trade-war damage while a slowing US economy limits downside risks for the euro.
Morgan Stanley estimates that US car prices could jump by 11–12% if protectionist measures intensify, a scenario that Boston Fed President Susan Collins warns would be inflationary. These developments leave the Federal Reserve little room for accommodative rate cuts, reinforcing the notion that the dollar might become a “toxic currency” if further protectionism dampens economic activity. Investors holding EURUSD positions see this dynamic as a buffer, with auto dealers’ inventories offering at least two or three months of breathing room. During this window, the euro could benefit from renewed appetite for less vulnerable currencies.
The trading plan of buying EURUSD remains viable if the pair continues to hold the 1.0735–1.0755 range and eventually rises above 1.082. A steady push beyond that threshold could unlock more upside as traders anticipate longer delays or softening rhetoric on tariffs. While such positions carry heightened risk under unpredictable policy decisions, market history has shown that periods of political gridlock and shifting deadlines can create significant short-term opportunities for gains, especially when underscored by a resilient fiscal backdrop in Europe.