EUR/USD fights off bearish flows, but tariffs and cautionary Fed remain

• EUR/USD clawed back ground on Tuesday, but remains below 1.1000.

• European data takes a backseat as markets focus on rate cut bets and trade policy fallout.

• Key data coming up later this week includes US inflation and consumer sentiment figures.

EUR/USD caught a mild bullish recovery on Tuesday, snapping a two-day losing streak and chalking in some last-minute gains before the Trump administration’s widespread “reciprocal” tariffs come into effect on April 9. Fedspeak from key policymakers is beginning to clash with rising market expectations of Fed rate cuts through the rest of 2025, putting markets on a collision course with the negative impacts of far-reaching tariffs.

Forex Today: Markets’ attention shifts to the Fed Minutes

Overall, the European economic data calendar is light this week, and Tuesday provided a refreshing break from the usual barrage of geopolitical and trade news typical of recent weeks under the Trump administration. However, several important Federal Reserve (Fed) officials seized the moment to remind us that uncertainty and the adverse inflationary effects of US tariffs will complicate, not facilitate, the Fed's process of cutting rates.

Unfazed by this, rate traders are increasingly betting that the Fed will feel compelled to initiate a rate-cutting cycle before the year ends, as the negative economic fallout from those same tariffs could nudge the US toward recession. Data from the CME’s FedWatch Tool indicates that rate swap traders are starting to speculate that a quarter-point rate trim might come as soon as May. Nevertheless, most participants in the rate market still deem a 25 basis point cut in July as more probable, anticipating a total reduction of 100 basis points or more by year-end.

Fed's Goolsbee: Tariffs are way bigger than anticipated
Fed's Daly: I'm a little concerned inflation may pick back up

Consumer Price Index (CPI) inflation data is due out on Thursday, while Producer Price Index (PPI) inflation and the University of Michigan (UoM) Consumer Sentiment Index results will be released on Friday. This will represent the final set of significant US inflation and sentiment figures from the ‘pre-tariff’ period of 2025, serving as critical benchmarks for the remainder of the year.

EUR/USD cut off a two-day losing streak on Tuesday, marking in a near-term technical support level near 1.0900. However, bidding pressure remains thin, and a mild push from the short side could easily push Fiber back to the 200-day Exponential Moving Average (EMA) just south of 1.0700.

Despite a sharp recovery by the Euro through March, a stiff resistance zone remains priced in between 1.1100 and 1.1000.

EUR/USD daily chart