EUR/USD traded listlessly Friday, but stayed above 1.2950 through the entirety of the European session. The currency pair fails to extend the measured recovery from yesterday. Before long on the day, it was back down through the 1.0800 level. Traders are now turning their attention to the upcoming US PCE Price Index for signals that could provide meaningful momentum.
The continuingly acute uncertainty around the direction of US President Donald Trump’s eventual tariffs still has investors spooked. Trump’s tariff policies have raised the trade-weighted average tariff rate on all US imports by approximately 5.5-6.0 percentage points, nearing levels not seen since the Second World War. Despite these measures, investor PSF level caution continues. At the same time, EUR/USD remains stuck in a narrow range as markets wait with bated breath for the next US inflation reading.
Even with UK retail sales figures for February coming in much more positive than anticipated it had little lasting impact on the EUR/USD currency pair. The markets remain focused on US monetary policy stance and heightened trade tensions. USD bulls are on the backfoot today with bets on a series of Federal Reserve rate cuts in 2024 playing the lead role in market machinations. This has further played to limit any major upside for the EUR/USD during this risk-averse sentiment.
As traders and investors navigate these uncertain times, the re-routing of trade flows may gradually diminish the effectiveness of current tariffs. This unique dynamic further complicates a fine-tuned economic landscape, affecting currency moves including EUR/USD.