EUR/USD strengthens ahead of PMI data releases from the Eurozone, Germany, and the United States.
The US Dollar struggles as Trump's trade policies fuel concerns over a potential economic slowdown.
The Euro gains support from improved risk sentiment as the White House adjusts its tariff strategy before the April 2 rollout.
EUR/USD pauses its three-day decline, trading around 1.0840 during Asian hours on Monday. The pair gains as concerns over a US economic slowdown, driven by trade policies under President Donald Trump, weigh on the US Dollar (USD). Investors are now focused on the preliminary March Purchasing Managers Index (PMI) data for the Eurozone, Germany, and the United States (US), set for release later in the day.
The EUR/USD pair also benefits from improved risk sentiment as the White House revises its tariff strategy before the April 2 implementation. According to the Wall Street Journal, the administration is expected to drop some industry-specific tariffs while imposing reciprocal tariffs on countries with strong trade ties to the US.
Additionally, geopolitical tensions ease following talks between Ukrainian and US officials in Riyadh on Sunday. Efforts to broker a ceasefire continue, with President Trump advocating for an end to the three-year war. Ukrainian Defense Minister Rustem Umerov discussed measures to safeguard energy and critical infrastructure, while US and Russian delegates are set for separate talks on Monday, according to Bloomberg.
However, the Euro (EUR) faces headwinds amid concerns that Trump’s reciprocal tariffs could significantly hinder the Eurozone’s economic growth. Last week, European Central Bank (ECB) President Christine Lagarde cautioned about downside risks stemming from the Trump-led trade dispute while downplaying fears of persistently high Eurozone inflation.
Adding to the uncertainty, ECB Vice President Luis de Guindos told The Sunday Times that President Trump’s policies are creating more economic instability than during the COVID-19 crisis. Similarly, Jose Luis Escriva stated on Bloomberg TV on Friday that inflation and economic growth forecasts face significant risks in both directions, making future interest rate decisions highly unpredictable.
Germany, one of the US's key trading partners, is expected to bear the brunt of Trump’s reciprocal tariffs. While the US currently imposes a 2.5% tariff on German car imports compared to the Eurozone’s 10% duty, Trump has threatened to introduce a 25% tariff on foreign automobiles. Germany’s Bundestag lower house of parliament has approved measures to expand borrowing limits, injecting billions of Euros into the economy, which may cushion against potential US tariff impacts.
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