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Possible trade tariffs and dovish Fed put bearish pressure on euro
The euro (EUR) lost 0.34% against the U.S. dollar (USD) on Friday. Traders decided to exit their long EURUSD positions ahead of the 2 April tariff deadline.
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Possible effects for traders
EURUSD has increased by over 7% since mid-January as worries over the U.S. economic growth under the Trump administration's trade policies pressured the greenback. German Parliament passed a reform of the country's borrowing rules and a €500-billion fund to revamp its infrastructure and revive Europe's largest economy. This development also supported the euro. 'It's really been a huge rally in EURUSD this quarter... so, naturally, we're seeing some profit-taking ahead of the 2 April tariff deadline', said George Vessey, lead FX and macro strategist at Convera. 'While it is impossible to know exactly what the administration has in mind for its next move, our base case remains that tariff rates are likely to go up significantly and that this will drive a rebound in the U.S. dollar', Jonas Goltermann, deputy chief markets economist at Capital Economics said in a note.
At the same time, the U.S. Federal Reserve (Fed) indicated last week that it was in no rush to cut interest rates. These comments strengthened the greenback and pushed EURUSD lower. 'We're not going to be in any hurry to move', Fed Chair Jerome Powell said. He underscored the challenge policymakers face in navigating Trump's tariffs policy and the potential impact on the domestic economy. Overall, EURUSD is now experiencing heightened volatility, reflecting the confluence of trade policy uncertainties, fiscal stimulus measures, and evolving monetary policy stances. Thus, traders should carefully assess the potential shifts in the currency pair's trajectory. The sideways market will likely set in in the short term, with the pair moving within the 1.07500–1.09000 range.
EURUSD rose slightly during the Asian and early European trading sessions. Today, traders should focus on the Purchasing Managers' Index (PMI) reports. French, German, and Eurozone data will come out at 8:15, 8:30, and 9:00 a.m. UTC, respectively. The U.S. PMI is due at 1:45 p.m. UTC. All reports will likely impact the EURUSD exchange rate. Key levels to watch are support at 1.07540 and resistance at 1.09130.
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