02 Apr 2025

EUR/USD fluctuates within a narrow range near 1.0800 as market participants await the announcement of reciprocal tariffs by US President Donald Trump. Concerns regarding these tariffs have led to a decline in confidence among American businesses and consumers. Additionally, disappointing Eurozone HICP figures suggest the possibility of further interest rate reductions by the European Central Bank (ECB).

On Wednesday, during European trading hours, EUR/USD hovers around 1.0800. The currency pair is lacking a clear direction as investors hold off on establishing new positions ahead of President Trump's tariff announcement scheduled for 20:00 GMT.

The new tariffs proposed by President Trump are anticipated to take effect immediately following the announcement. This development could disrupt the global trading landscape, rendering products from countries facing increased tariffs less competitive. Furthermore, elevated import duties may hinder global business investment, as companies grapple with uncertainty regarding the demand for their goods.

On Tuesday, US Treasury Secretary Scott Bessent remarked that the President is set to implement the highest tariffs on trading partners. He noted that countries affected by these tariffs could avoid them by complying with US requirements, particularly by reducing import rates from the United States.

Investors are concerned that Trump's tariffs may negatively impact the US economy, especially in light of declining consumer and business confidence. The ISM Manufacturing Purchasing Managers Index (PMI) revealed on Tuesday that business activity contracted in March after two months of growth. ISM Manufacturing Chair Timothy Fiore commented, "Demand and production have decreased, and layoffs have persisted as companies adjusted to the uncertainty in demand."

Looking ahead, investors will be attentive to the ADP Employment Change data for March, scheduled for release at 12:15 GMT. It is anticipated that US private employers added 105,000 new jobs, an increase from the 77,000 jobs added in February.

On Tuesday, US Treasury Secretary Scott Bessent remarked that the President is set to implement the highest tariffs on trading partners. He noted that countries affected by these tariffs could avoid them by complying with US requirements, particularly by reducing import rates from the United States.

Investors are concerned that Trump's tariffs may negatively impact the US economy, especially in light of declining consumer and business confidence. The ISM Manufacturing Purchasing Managers Index (PMI) revealed on Tuesday that business activity contracted in March after two months of growth. ISM Manufacturing Chair Timothy Fiore commented, "Demand and production have decreased, and layoffs have persisted as companies adjusted to the uncertainty in demand."

Looking ahead, investors will be attentive to the ADP Employment Change data for March, scheduled for release at 12:15 GMT. It is anticipated that US private employers added 105,000 new jobs, an increase from the 77,000 jobs added in February.

Daily market movers summary: EUR/USD remains cautious ahead of Trump's tariff announcement

EUR/USD is exhibiting caution as investors anticipate that the European Union (EU) will be among the primary trading partners of the United States facing the highest tariffs. Donald Trump has repeatedly accused the EU of engaging in unfair trade practices with the US, claiming that the Eurozone does not purchase enough American products.

The imposition of substantial tariffs on the Eurozone by Trump could have a profound effect on the region's economic prospects. Last week, European Central Bank (ECB) President Christine Lagarde indicated that the ongoing trade conflict could reduce the bloc's economic growth by 0.5%. A slowdown in economic growth, coupled with declining inflationary pressures in the Eurozone, may heighten expectations for an interest rate cut by the ECB in its upcoming policy meeting this month.

On Tuesday, Eurostat reported that the core Harmonized Index of Consumer Prices (HICP), which excludes volatile categories such as food, energy, alcohol, and tobacco, increased at a slower rate of 2.4% over the 12 months leading to March, falling short of the 2.5% forecast and down from the previous figure of 2.6%.

The Eurozone's outlook could deteriorate further if the EU Commission implements retaliatory actions in response to Trump's tariffs. European Commission President Ursula von der Leyen cautioned on Tuesday, “We do not necessarily want to retaliate, but if it is necessary, we have a strong plan to do so, and we will use it.” She emphasized that all options for countermeasures are “on the table” and that the EU possesses the capability to “push back against US tariffs.”