Downward pressure on the EUR/USD currency pair would be considerable. It is now threatening two-week lows as the highly risk-averse mood among investors increases dollar demand by pushing them towards safe havens. The two now are trading in a broad consolidation below the key 1.1700 level. At times, it can be seen hovering around 1.1687 during the American trading hours. Escalating trade tensions and President Trump’s most recent round of tariff threats have contributed to a sharp downturn. Together, these elements have strongly undermined market sentiment.
Indeed, market dynamics have changed lately, leading to a more general risk-off sentiment that has been supportive of the US Dollar. Futures traders are tensing up as worries increase over possible new tariffs on European imports. This uncertainty has fostered a risk-averse tone in the market, particularly for the Euro. Safe-haven flows into the US Dollar have picked up dramatically. This has forced the EUR/USD pair below its two week lows.
Moreover, President Trump’s just-increasingly-bizarre rhetoric on trade has been another interesting variable that has driven the EUR/USD exchange rate. He is preparing to issue a formal notice of intent to the European Union (EU). This notice will focus specifically on these potential new requirements which may apply to all imports from Europe. Friday’s announcement will likely add to the already negative sentiment surrounding the Euro, as traders prepare for the potential fallout.
Additionally, President Trump may have confused remaining trading partners without specific letters of intent or finalized agreements with a blanket tariff. These new tariffs will be imposed at a rate of either 15% or 20%. Unlike the previous rounds of measures, these will be aimed at countries that have not completed trade agreements with the United States. Our staff analysis will add additional upward pressure on the Euro against the US Dollar.
And since then, it has proved able to maintain a floor of support at the 97.80 area. This relative stability in the DXY index has led the Euro to face increased headwinds in the EUR/USD cross. Beyond the threat of tariffs, wider economic realities and overall market sentiment are still nagging at currency valuations.
Confidence in the Euro’s initial bounce-back against the other major currencies continues to be watching. In fact, here’s a recent heat map from CoinMarketCap visualizing percentage changes between major currencies. It underscores the Euro’s waning power relative to the US Dollar. Traders continue to react to fears of geopolitical uncertainty and economic indicators that drive the mood of the markets. This response is deeply manifested in the percentage change of the Euro (EUR) vs US Dollar (USD).
While market participants continue to work their way through these changes, they are apprehensive about further moves in the EUR/USD currency cross. Just the fear of new and higher tariffs of a trade war in general might be enough to rattle currency markets. This development could set off even more turmoil in those new markets. Investor’s eyes are glued in anticipation to President Trump’s next move and tweet, confounding us all with their uncertain effect on our economic fate.