- EUR/USD declines toward 1.0460 as US President Trump renews threats of a 25% tariff on Eurozone car imports and other goods.
- The US Dollar holds steady, gaining safe-haven demand amid escalating tariff concerns.
- Investors look ahead to US PCE inflation data for January and preliminary HICP figures from major Eurozone nations, set for release on Friday.
EUR/USD remains under pressure below the key psychological level of 1.0500 during European trading hours on Thursday. The pair faces selling pressure after US President Donald Trump reiterated tariff threats against the Eurozone.
During a press conference on Wednesday, President Trump stated that he would soon impose 25% tariffs on "cars and other things" from the Eurozone. However, he did not provide a specific timeline for the implementation.
In response, a European Commission (EC) spokesperson warned that the EU will respond firmly and immediately to any unjustified trade barriers, emphasizing that tariffs should not be used to undermine legal and non-discriminatory policies.
A tariff war between the US and the Eurozone could further weaken an already fragile European economy, where sluggish demand has been a persistent concern. This scenario would put additional downward pressure on the Euro (EUR).
Meanwhile, political uncertainty in Germany has also kept the Euro under pressure.
Frederich Merz's conservative CDU is expected to form a coalition government with outgoing Chancellor Olaf Scholz's SPD.
On Wednesday, Bundesbank President Joachim Nagel stressed the urgency of addressing structural issues in Germany's economy, warning that delays in economic reforms could harm the country’s competitiveness.
With ongoing trade tensions and political uncertainty, EUR/USD remains vulnerable to further downside risks.
Daily Market Movers: EUR/USD Stays Weak as US Dollar Holds Firm
- EUR/USD remains under pressure as the US Dollar (USD) retains Wednesday’s gains, supported by safe-haven demand amid Trump’s renewed tariff threats on the Eurozone. However, USD upside is limited as dovish Federal Reserve (Fed) expectations continue to build.
- In Thursday’s session, investors will closely watch key US economic data, including January Durable Goods Orders, weekly Initial Jobless Claims (for the week ending February 21), and the revised Q4 Gross Domestic Product (GDP) report.
- Market sentiment has shifted toward expectations of a Fed rate cut in June, following a likely hold in March and May. The CME FedWatch Tool indicates a 68% probability that the Fed will lower interest rates in June.
- Weakening US economic data has reinforced the case for Fed rate cuts. The flash S&P Global PMI report signaled a decline in US service sector activity, while a sharp drop in Consumer Confidence raised concerns over the Fed maintaining a restrictive monetary policy for too long. Investors now await Friday’s US Personal Consumption Expenditures Price Index (PCE) data, a key inflation gauge that could shape the Fed’s next moves.
- In the Eurozone, traders are looking ahead to flash inflation data from Germany and its six states, France, and Italy, set for release on Friday. These figures will be crucial in shaping expectations for the European Central Bank’s (ECB) future monetary policy decisions.
Technical Analysis: EUR/USD Holds Above 1.0500 Amid Tight Range
EUR/USD remains range-bound around 1.0500 on Thursday, with the 50-day Exponential Moving Average (EMA) at 1.0440 providing key support for the pair.
The 14-day Relative Strength Index (RSI) hovers below the 60.00 level, indicating a lack of strong bullish momentum. A sustained move above 60.00 could signal a potential bullish breakout.
On the downside, the February 10 low of 1.0285 serves as major support. Conversely, the December 6 high of 1.0630 stands as a critical resistance level for Euro bulls.
