03 Apr 2025

EUR/USD has surged to approximately 1.1145, driven by a significant decline in the US Dollar following President Trump's announcement of reciprocal tariffs. The US President has introduced a 20% tariff on goods from the Eurozone, prompting European Commission President Ursula von der Leyen to promise retaliation if discussions with the US do not yield results.

During Thursday's North American trading session, EUR/USD reached its highest point since October, gaining nearly 2.5% for the day. This increase in the major currency pair is attributed to the US Dollar (USD) facing pressure due to ongoing shifts in the US economy. The US Dollar Index (DXY), which measures the dollar's strength against six key currencies, plummeted to around 101.30, marking its lowest level in six months.

On Wednesday, Stephen Miran, Chair of the US Council of Economic Advisers, acknowledged that the tariffs introduced by President Trump might create short-term economic fluctuations but could ultimately benefit long-term economic conditions. His remarks followed Trump's announcement of reciprocal tariffs, which included a 10% baseline duty on all imports to the US, along with additional specific tariffs on many trading partners. Leaders from affected countries have indicated they may respond with countermeasures.

Market analysts anticipate that Trump's tariffs could trigger a global economic slowdown, including within the US. Experts suggest that the newly imposed import duties are more substantial than anticipated and could potentially push the US economy into a recession. This situation raises concerns about stagflation, as increased tariffs may hinder the Federal Reserve's (Fed) efforts to manage persistent inflationary pressures. Consequently, the Fed may find it challenging to keep inflation close to the 2% target while ensuring full employment.

Looking ahead, investors will be closely monitoring the US Nonfarm Payrolls (NFP) data for March, set to be released on Friday. This official employment report is expected to shape market expectations regarding the Fed's monetary policy direction. On Wednesday, the ADP Employment Change report indicated that the private sector added 155,000 jobs in March, significantly exceeding expectations.

Daily market movers summary: EUR/USD surges amid US Dollar weakness

The robust performance of the EUR/USD pair is largely attributed to the Euro's (EUR) strength. Despite rising concerns over a potential trade conflict between the US and the Eurozone following President Donald Trump's announcement of 20% reciprocal tariffs on the European Union (EU), the Euro continues to gain ground.

European Commission (EC) President Ursula von der Leyen has indicated that the repercussions of these tariffs could be "dire for millions of people worldwide." She cautioned that Europe is ready to implement countermeasures if discussions with Washington do not yield a favorable outcome. Von der Leyen also mentioned that the EC is in the process of finalizing the "first package of countermeasures" in response to the tariffs on steel and is preparing additional measures to safeguard European "businesses and interests."

Last month, von der Leyen highlighted the possibility of imposing tariffs on imports from the US valued at up to 26 billion Euros as a response to Trump's extensive 25% tariffs on steel and aluminum, which took effect on March 12.

In the meantime, officials from the European Central Bank (ECB) have dismissed concerns that inflation driven by tariffs could hinder prospects for further interest rate reductions. During European trading hours, ECB policymaker and Governor of the Bank of Greece, Yannis Stournaras, stated that US tariffs would not impede an anticipated rate cut in April, as the inflation trajectory remains "unchanged." Stournaras projected that US tariffs could "negatively impact" the Eurozone's Gross Domestic Product (GDP) growth rate by approximately "0.3%-0.4%" in the first year.

Technical Analysis: EUR/USD Set to Revisit 1.1200

On Thursday, EUR/USD surged close to 1.1150 following a significant breakout above the previous resistance level of 1.0955, reaching heights not observed since early October. The short-term outlook for this major currency pair has become highly optimistic, as the 20-day Exponential Moving Average (EMA) continues its upward trend, currently positioned around 1.0800.

The 14-day Relative Strength Index (RSI) has risen to approximately 70.00 after previously cooling to around 60.00, indicating a resurgence of bullish momentum.

In terms of support levels, the mid-March resistance area near 1.0955 serves as the initial point of consideration, followed by the March 31 peak at 1.0850. On the other hand, the September 25 high of 1.1214 represents a critical resistance level for Euro bulls.