EUR/USD extends declines as tariff threats begin to break markets

EUR/USD declined 0.26% on Wednesday, losing ground for six straight days.

US President Trump reiterated his threats to impose far-reaching tariffs in April.

The EU has revealed it is bracing for its own package of stiff tariffs from the US.

EUR/USD accelerated to the downside on Wednesday, shedding over one-quarter of one percent on Wednesday and skidding back below 1.0750 for the first time since the first week of March. The pair has lost ground for six straight trading days, and souring market sentiment on trade war fears is poised to take more bites out of risk appetite in the days to come as we get closer to April 2.

President Trump plans 25% tariff on imported vehicles

According to various avenues of information, the Trump administration still plans to move ahead with a wide tariff on all copper imports into the US, matching the Trump team’s recent 25% flat import tax on all steel and aluminum that cross the US border. President Trump also intends to announce additional tariffs on automobiles across the board, and European Union (EU) officials are expecting the Trump administration to announce a tariff of around 20% on all, or most, or a targeted group of goods, depending on what day it is and how Donald Trump is feeling at that time. 

Fed's Musalem expects inflation back to 2% by 2027

All of this may or may not be in addition to the anticipated “reciprocal” tariff package that President Trump intends to kick off on April 2, which countries may or may not be able to get exemptions from. Donald Trump intends to impose a matching tariff on other countries that have their own trade barriers on US goods, a rather perplexing approach to trade in general. President Trump has also floated the idea of classifying VAT, or luxury taxes, as a kind of pseudo-tariff on US goods, and including those in reciprocal tariffs.

US GDP growth figures are due on Thursday, but the non-preliminary print is unlikely to drive much momentum in either direction. This week’s key US data release will be Core Personal Consumption Expenditure Price Index (PCE) inflation due on Friday. Investors will be hoping that a recent upturn in inflation figures will prove to be temporary, but median forecasts are expecting annualized PCE inflation to rise to 2.7% YoY in February.

EUR/USD price forecast

Six days of steady declines are taking their toll on EUR/USD, as bids slide nearly 2% top-to-bottom from last week’s peak just above 1.0950. Bearish momentum has taken hold, and price action is poised to make a fresh push into the 200-day Exponential Moving Average (EMA) just south of the 1.0700 handle.

EUR/USD daily chart