The EUR/USD pair remains under pressure following the sharp decline it experienced on Friday, driven by the Non-Farm Payrolls (NFP) report. Additional downside risks have emerged after President Trump announced new tariffs on steel, which may lead to further duties on other sectors such as automobiles, potentially weighing negatively on the euro’s outlook.
Beyond these tariff-related developments, the interest rate gap between the Eurozone and the United States continues to exert pressure on EUR/USD, with the pair trading near 1.03. The European Central Bank (ECB) is expected to ease monetary policy by an additional 88 basis points this year, widening the divergence between US and European economic policies. Meanwhile, strong US economic data has pushed back expectations of Federal Reserve rate cuts, further strengthening support for the US dollar. With the anticipation of new tariffs, the EUR/USD downtrend may persist, potentially pushing the pair toward 1.0200 or lower.
Despite the challenges facing the euro, an unexpected factor could emerge in the coming weeks—progress in resolving the Ukraine conflict. There is speculation that the US government may announce new strategies at the Munich Security Conference, but any significant improvement in Russia-related developments has not yet been priced into the foreign exchange markets.
The US dollar continues to benefit from the market reactions to tariffs, with investors closely monitoring any new developments. The United States may soon announce counter-tariffs, but it remains unclear whether they will target specific sectors such as automobiles, pharmaceuticals, or semiconductors, or if they will be applied more broadly. Additionally, President Trump is expected to sign a new set of executive orders, adding further uncertainty to the market.
Overall, the risks surrounding the US dollar remain skewed to the upside, especially if Trump imposes broader retaliatory tariffs. The dollar’s strength is being reinforced by tariff threats, strong US economic data, and sustained support from rising energy prices. As a result, the EUR/USD bearish outlook is likely to persist, with a possible decline toward 1.0200 or lower in the coming weeks.
