EUR/USD depreciates further amid Trump's threat of higher blanket tariffs, strong US data

• The Euro depreciates further as the US Dollar strengthens in risk-off markets.
• US Jobless Claims drop unexpectedly, dampening hopes of Fed interest-rate cuts in the coming months.
• EUR/USD keeps trading lower, with bears looking at the 1.1660 support area.

The EUR/USD pair is trading lower for the third consecutive day on Friday, with risk appetite subdued after the US President Donald Trump announced that the European Union (EU) will be included in the next batch of tariff letters and raised blanket levies for all other countries to 15% or 20% from the previous 10%.

The Euro (EUR) extended its decline against a stronger US Dollar (USD) in a risk-off Asian session and trades at 1.1680 at the time of writing, having hit intra-day lows at 1.1665. The broader picture shows the pair in a corrective pullback from the long-term highs reached on July 1, on track to close the week with a 0.8% decline.

Trump rattled markets again, this time in a TV interview, announcing a new round of tariffs for a batch of US partners, and that the European Union will be among them this time. These comments cast doubts about the progress of the trade talks between both parties, but EU officials remain positive about the chances of reaching a deal before the August 1 deadline.

In the macroeconomic front, data from the US released on Thursday showed that initial claims for unemployment benefits fell unexpectedly in the first week of June, adding to evidence of a resilient labour market and giving an additional impulse to the US Dollar.

The calendar today is fairly light, with speeches from European Central Bank (ECB) officials Fabio Panetta and Piero Cipollone, and Current Account figures from Germany during the European morning. In the US, the WASDE agricultural report and the monthly budget statement are unlikely to trigger significant volatility.

Daily digest market movers: Strong employment data provides additional support to the USD

• The US Dollar rallied further on Thursday after the US Weekly Jobless Claims dropped to a seven-week low. Initial claims dropped by 6,000 to 227,000 against expectations of a 2,000 increase to 235,000 from the 233,000 claims seen a week earlier.
• Claims data dampened hopes of Fed cuts in the coming months and pushed US Treasury yields somewhat higher, bringing the US Dollar higher with them. The CME Watch tool shows less than 5% chances of a rate cut in July and about 65% chances of at least 25 basis points (bps) cut in September, down from 6% and 72%, respectively, a day ago.
• Later on Thursday, Fed Governor Christopher Waller reiterated that the bank's monetary policy is too restrictive and called for a rate cut in July as, he said, inflation from tariffs will be temporary.
• Likewise, San Francisco Fed President Mary Daly affirmed that the impact of tariffs on consumer prices will be muted and forecasted two interest rate cuts before the end of the year.
• On the other side of the Fed spectre, St. Louis Fed President Alberto Musalem said that it is still too early to assess whether the impact of tariffs will be a one-time boost or longer-lasting, highlighting the divergences within the US central bank's Monetary Policy Committee.
• In the Eurozone, on Friday, France's Consumer Prices Index (CPI) confirmed that inflation grew at a 0.4% pace in June compared with the previous month, while the yearly rate was revised up to a 0.9% rate, from the previously estimated 0.8%
• In Germany, data released by Destatis on Thursday confirmed preliminary figures showing that consumer inflation eased to the ECB's 2% year-on-year target rate in June, while monthly inflation stagnated.

EUR/USD drops further within a descending channel

EUR/USD continues trading in a succession of lower highs and lower lows, in a bearish correction after peaking at 1.1830 on July 1. Price action remains trapped within a broadening wedge pattern, with the support level between Thursday's low, at 1.1660, and the channel's bottom, at 1.1650, holding bears for now.

Technical indicators are pointing lower, with the 4-hour Relative Strength Index (RSI 14) well below the 50 level but still far from oversold territory, suggesting that further depreciation is likely. Below here, the pair might find support at the 1.1640-1.1630 area, where the 50% Fibonacci retracement of the late June rally meets the June 12, 24, and 25 highs.

On the upside, the intra-day high, at 1.1710, and the area between the channel resistance at 1.1740 and Thursday's high at 1.1750 are likely to limit upside attempts.