During the early European trading session Monday, the euro/dollar currency pair is still retaining a small upside. Nonetheless, it continues to trade south of the 1.0850 level. This upward trend is simultaneously boosted by a fairly weaker US Dollar. This fall is being driven by mounting speculation over near-term Federal Reserve cuts to interest rates. Second to only the USD/JPY pair, the EUR/USD funding is one of the biggest in the global Forex market. Due to its fast-moving nature, newcomers and veterans alike must learn to play the market wisely.
The pair’s cautious stance can be attributed to impending announcements concerning Germany’s preliminary inflation data and US President Donald Trump’s expected reciprocal tariff announcement. These changes are important, not just because they have the promise to shift market behavior in a larger and more fundamental way. The GBP/USD pair, on the other hand, is holding steady, dancing around the level of 1.2950 in the first half of the European day.
One of the biggest drivers weighing on the US Dollar is the market’s expectations for Trump’s known-shy tariff game. These tariffs are on the verge of reaching post war II highs. First, they are already affecting the simple average tariff rate, and thus the trade-weighted average tariff rate, on all US imports. All market participants believe that these tariffs will create inflationary pressure and negatively impact economic growth. This matter is sure to strengthen the EUR/USD currency pair.
The tariffs’ ramifications are far more rampant—including in the accelerating collapse of the US Dollar. This constructive backdrop keeps EUR/USD sentiment positive, allowing it to leverage strength from the underlying economic backdrop. The trade flow and monetary policy continue to drive the overall bottom-line fundamentals direction of this huge currency pair.