EUR/USD under pressure as Trump tariff threats bolster US Dollar

• EUR/USD edges lower toward two-week lows as risk aversion lifts demand for the US Dollar.
• Trade tensions escalate as President Trump signals 15–20% blanket tariffs on nations yet to receive formal tariff letters.
• Markets see no interest rate cut by the ECB at the July meeting, and only 25 bps of easing priced in over the next 12 months.

The Euro (EUR) edges lower against the US Dollar (USD) on Friday, pressured by renewed tariff threats from the United States (US) and a broader wave of risk aversion that has lifted demand for the Greenback. As investors digest US President Donald Trump’s escalating trade rhetoric, including potential new duties on European imports, market sentiment has turned cautious, fueling safe-haven flows into the Greenback and dragging EUR/USD toward its lowest levels in two weeks.

The EUR/USD pair is consolidating below the 1.1700 mark, struggling to find fresh bullish momentum amid heightened trade tensions. At the time of writing, the pair is hovering around 1.1687 during the American trading hours, as the broader risk-off mood and stronger US Dollar keep the shared currency under pressure.

Meanwhile, the US Dollar Index (DXY), which tracks the value of the Greenback against a basket of six major currencies, is holding firm around the 97.80 level.

The latest round of tariff threats from the US continues to unsettle global markets, with the Euro remaining under pressure. President Trump is reportedly preparing to send a formal notice to the European Union (EU) soon. He has signaled that all remaining trading partners who have not yet received specific tariff letters or finalized trade agreements will be hit with blanket tariffs of 15% or 20%. This move follows his earlier announcement of a 35% tariff on Canadian imports, which has escalated trade tensions across the board. While the EU has expressed a willingness to finalize a trade framework to avoid confrontation, uncertainty remains high.

On the monetary policy front, European Central Bank (ECB) officials offered diverging views on the policy outlook Friday, reflecting internal differences over the path ahead. Executive Board member Isabel Schnabel struck a firmly hawkish tone, stating that "the bar for another rate cut is very high" and dismissing the need for further easing unless inflation materially deviates from the ECB’s 2% target over the medium term — something she currently sees no evidence of. In contrast, Governing Council member Fabio Panetta took a more cautious approach, noting that if downside risks to growth intensified and reinforced disinflationary pressures, further monetary easing would be warranted. Despite the divergence, markets are pricing in virtually no chance of a cut at the ECB’s next meeting on July 24, and see just 25 basis points of total easing over the next 12 months.