The euro remained steady against the US dollar, with EUR/USD holding above 1.0350, but downside risks persist as reciprocal tariff threats between the US and its trading partners weigh on market sentiment. Traders are closely watching for potential trade escalations, which could impact economic growth and drive further volatility in currency markets.
The US dollar remains resilient, supported by elevated Treasury yields and expectations that the Federal Reserve will keep rates higher for longer. Despite some signs of economic slowing, the Fed has maintained a cautious stance, emphasizing the need to see sustained inflation progress before considering rate cuts. This has helped the greenback maintain strength, limiting upside potential for the euro.
Meanwhile, the Eurozone economy continues to face headwinds, with recent data pointing to sluggish growth and weak consumer demand. The European Central Bank (ECB) has remained noncommittal about future rate policy, signaling that further tightening is unlikely in the near term. The lack of a clear hawkish stance has made the euro vulnerable to external pressures, including the growing uncertainty surrounding global trade policies.
The latest tariff disputes have sparked fresh concerns over supply chains and inflationary risks, creating a challenging backdrop for risk-sensitive assets. If the US and its trading partners escalate trade tensions, the euro could face further declines, especially if global investors continue to favor the US dollar as a safe-haven currency.
From a technical standpoint, EUR/USD is hovering near key support at 1.0350, with any break lower potentially opening the door to further losses toward 1.0300. However, a recovery above 1.0400 could ease near-term downside pressure, depending on broader market conditions.
For now, EUR/USD remains in a vulnerable position, with traders focusing on upcoming economic data and developments in trade negotiations. If tensions escalate further, the pair may struggle to hold its current levels, keeping downside risks in play.
