EUR/USD rises to seven-week highs as Fed easing hopes, tariff threats hit the USD
- The Euro rallies to fresh seven-week highs with the US Dollar on its back foot.
- Renewed tariff fears and soft inflation data are weighing on the US Dollar.
- EUR/USD bulls are focusing on the year-to-date highs at 1.1575.
The EUR/USD pair has broken above the range of the last few days and is trading above 1.1500 for the first time in almost two months on Thursday. A fresh tariff threat by US President Donald Trump, coupled with the moderate US inflation figures, is hammering the US Dollar (USD).
The effect of the trade truce with China has been short-lived. Trump has stirred markets again, touting that he will impose unilateral tariffs on trade partners if they do not reach a trade deal before the July 9 deadline, Bloomberg reports.
Before that, the US Dollar was already on its back foot following the softer-than-expected US Consumer Price Index (CPI) data released on Wednesday, which increased expectations that the Federal Reserve (Fed) might cut interest rates in September.
Futures markets are pricing a nearly 60% chance of a 25-basis-points rate cut after the summer, up from 50% last week, according to data from the CME Fed Watch tool.
The Eurozone Calendar is light this week, but a slew of European Central Bank policymakers have reiterated President Christine Lagarde’s latest message, hinting at the end of the easing cycle.
This change of rhetoric, supported by a string of positive US data last week, is highlighting a monetary policy divergence with the Federal Reserve that provides additional support to the common currency.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.24% | -0.01% | -0.39% | -0.08% | 0.14% | 0.13% | -0.44% | |
| EUR | 0.24% | 0.23% | -0.17% | 0.16% | 0.36% | 0.37% | -0.18% | |
| GBP | 0.00% | -0.23% | -0.41% | -0.07% | 0.12% | 0.12% | -0.44% | |
| JPY | 0.39% | 0.17% | 0.41% | 0.32% | 0.52% | 0.47% | -0.05% | |
| CAD | 0.08% | -0.16% | 0.07% | -0.32% | 0.22% | 0.18% | -0.36% | |
| AUD | -0.14% | -0.36% | -0.12% | -0.52% | -0.22% | 0.00% | -0.55% | |
| NZD | -0.13% | -0.37% | -0.12% | -0.47% | -0.18% | -0.00% | -0.56% | |
| CHF | 0.44% | 0.18% | 0.44% | 0.05% | 0.36% | 0.55% | 0.56% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: The “Sell America” trade continues
- US President Trump rattled markets, announcing early on Thursday that he will send letters to trading partners in the next days with the terms of a trade deal to avoid higher tariffs ahead of the deadline on July 9.
- The fragile trade truce between the US and China failed to support the US Dollar on Wednesday. The US Dollar index has dropped to fresh seven-week lows and is nearing April’s multi-year low at 97.95. The Euro is one of the largest beneficiaries of US Dollar weakness.
- Also on Wednesday, US consumer prices rose by 0.1% in May and by 2.4% compared with the same month last year, below the market consensus of 0.2% and 2.5%, respectively. Core inflation fell to 0.1% in the month and remained steady at 2.8% year on year, also below the 0.3% and 2.9% respective figures anticipated by the market.
- A 10-year US Treasury Bond auction encountered strong demand on Wednesday, which eased fears about the US fiscal debt and provided some support to the US Dollar.
- The focus on Thursday will be on the US Producer Prices Index (PPI) to confirm the benign inflation pressures and increase hopes of a rate cut in September. The headline PPI is expected to have accelerated at a 0.2% monthly rate and 2.6% year-on-year from the -0.5% and 2.4% respective readings in April.
- In the Eurozone, more ECB officials will take the stage today. Policymakers are likely to dampen hopes of further monetary easing down the road, which is a supportive message for the Euro.
Technical analysis: EUR/USD approaches YTD highs at 1.1575
EUR/USD has broken the recent consolidation range and is heading higher. The 4-hour RSI is approaching overbought territory, which suggests a potential pullback, but downside attempts are likely to find buyers.
The pair has found resistance at 1.1530, not far from the April 22 high at 1.1547, which is the last hurdle ahead of the year-to-date high at 1.1572 (April 21 high).
On the downside, supports are at the intraday 1.1480 level ahead of the previous resistance, which will now act as support, at 1.1460 (June 2, 10 highs). Bears should push the pair below those levels to cancel the bullish trend.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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