07 Feb 2025

EUR/USD softens to around 1.0375 in Friday’s Asian session. 

Trump’s tariff threats weigh on the shared currency. 

US January employment data will be the highlights later on Friday

The EUR/USD pair is trading at a lower level of approximately 1.0375 during the Asian session on Friday. The prevailing uncertainty regarding US trade policy, coupled with a risk-averse sentiment, is exerting pressure on the Euro (EUR). Market participants are closely monitoring the upcoming German Industrial Production data in anticipation of the US Nonfarm Payrolls (NFP) report later in the day.

US President Donald Trump has been vocal about his tariff threats against the European Union, labeling the trade imbalance as an “atrocity” and asserting that tariffs “will definitely happen.” In response, EU leaders have indicated their intention to retaliate should Trump proceed with these tariffs. Piero Cipollone, a policymaker at the European Central Bank (ECB), has indicated that the central bank is likely to implement further interest rate cuts as inflation subsides, cautioning that ongoing trade tensions could adversely affect the eurozone, which comprises 20 nations. These escalating trade disputes may contribute to a decline in the shared currency against the US Dollar (USD).

In the United States, hawkish remarks from officials at the Federal Reserve (Fed) are lending some support to the Greenback. Chicago Fed President Austan Goolsbee remarked on Thursday that the current uncertainty complicates the Fed's decision-making process, suggesting a need to moderate the pace of interest rate cuts. Similarly, Dallas Fed President Lorie Logan noted that while there has been significant progress in addressing inflation, the US labor market remains robust, which may delay any imminent rate cuts by the Fed.

Economists project that the US economy added approximately 170,000 jobs in January, a decrease from the 256,000 jobs added in December. The unemployment rate is anticipated to remain stable at 4.1%, indicating ongoing strength in the labor market despite recent economic challenges. Average Hourly Earnings are expected to decline to 3.8% year-on-year in January, down from 3.9% previously. Should the reports reveal weaker-than-expected results, this may lead to selling pressure on the USD, potentially benefiting the major currency pair.