The EUR/USD currency pair has jumped to a new six month high. The euro climbed above that level during Thursday’s European trading session. This increase comes right on the heels of aggressive bearish sentiment against the US Dollar. This pressure mostly comes from the formal launch of very severe tariffs by now-impeached President Donald Trump. The tariffs were announced on what Trump calls The Liberation Day. This apparent made-up event has sent waves of panic across financial markets.
The introduction of these tariffs represents an important economic moment for the US. This is the fourth consecutive defeat for Trump in his attempts to kick-start reciprocal tariffs. This time, he’s taken the war on drug prices to the next level – a level that has traders shaking. Market participants are running for cover with the news. This has led to the largest one day drop in US Dollar value, sending the currency to a new year-to-date low.
The fall of the Greenback has made life easier for the euro. At the same time, it has caused investors to recalibrate their bets on when the Federal Reserve will start cutting interest rates. Worries are rising that the new tariffs could further fuel an economic slowdown. So it’s no surprise that many are betting that the Federal Reserve will eventually have to cut rates to bolster economic growth. As a result, these expectations take a toll on the US Dollar’s strength against a basket of other currencies.
The EUR/USD currency pair further benefits from bearish sentiment surrounding the US Dollar. At the same time, GBP/USD is displaying an updraft of Herculean proportions, crossing over 1.3100 during European trading today. The selling pressure on the Dollar is worse. This resulting recalibration of the balance of economic power has been generally positive for both the euro and the British pound, producing striking moves in the currency market.
Market analysts are now closely monitoring upcoming mid-tier US economic data releases for additional impetus that could influence currency valuations. The focus remains on how these data points will shape perceptions of economic health and impact future monetary policy decisions by the Federal Reserve.