The euro fell in European trade on Tuesday against a basket of major rivals, following a surge against the dollar yesterday. The current decline comes amid mounting global trade tensions as Trump imposes tariffs on Canada and Mexico.
Trump’s tariff threats turned into reality, with now the EU being set as the next target, with likely new tariffs announced in April.
The Price
The EUR/USD pair fell 0.15% today to $1.0471, with a session-high at $1.0496.
The pair closed up 1.1% on Monday, the best profit since January 20, as EU leaders agreed to present an emergency plan to the US to achieve peace in Ukraine.
The gains were also boosted by higher-than-expected eurozone inflation data for February, renewing inflationary pressures on ECB policymakers.
Trump’s Tariffs
Trump imposed 25% tariffs on Canada and Mexico, and a 10% additional tariff on Chinese products, damaging global sentiment.
China quickly responded by imposing 15% tariffs on some US imports, and will limit exports to 15 US companies.
Trump recently asserted that tariffs on the US will be implemented soon, accusing the EU of taking advantage of the US, with a trade deficit amounting to $300 billion.
Trump said the EU doesn’t take American cars or agricultural products, but conversely, the US takes millions of European cars and massive amounts of their food products.
The ECB
The European Central Bank will convene this week to discuss monetary policies and latest economic developments in the eurozone.
The ECB is expected to cut interest rates by 25 basis points to 2.65%, the lowest since December 2022.
Interest Rate Gap
The current eurozone-US interest rate gap stands at 160 basis points in favor of the US, and will likely expand to 185 basis points later this week, undermining the euro.
