EUR/USD drifts higher to near 1.1335 in Thursday’s early Asian session.
Businesses dealing with the early stages of Trump’s tariffs are seeking to pass increasing costs onto consumers, said the Fed Beige Book.
ECB’s Muller said rates may have to fall below neutral on trade.
The EUR/USD pair edges higher to around 1.1335 during the early Asian session on Thursday. Mitigating concerns over potential tariff threats by US President Donald Trump exerts some selling pressure on the US Dollar (USD).
According to a Federal Reserve’s (Fed) Beige Book report on Wednesday, businesses dealing with the early stages of Trump’s tariffs are looking for ways to pass increasing costs onto consumers. Companies reported receiving alerts from suppliers about increased prices, and they looked to find ways not to absorb the increases while noting uncertainty over the ability to pass them along to customers.
At the beginning of the month, Trump imposed a baseline import tax of 10% or more on dozens of nations, but then unexpectedly paused the taxes for 90 days to let countries negotiate lower rates. However, the uncertainty surrounding trade policy and concerns over the economic slowdown in the US could drag the Greenback lower and create a tailwind for EUR/USD.
Across the pond, the European Central Bank (ECB) cut its main interest rate by a quarter of a percentage point to 2.25% at its April meeting last week. During the press conference, ECB President Christine Lagarde said that US tariffs on EU goods, which had increased from an average of 3% to 13%, were already harming the outlook for the European economy.
Meanwhile, the ECB Governing Council member Madis Muller said on Wednesday that the central bank may have to lower interest rates to levels that stimulate the economy if trade uncertainty proves more damaging for growth. The dovish remarks from the ECB policymakers might weigh on the shared currency in the near term.
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