The euro rebounded against the US dollar, with EUR/USD rising from recent lows, as a softer greenback provided relief to the pair. However, gains remained capped as traders remained wary of Trump’s renewed tariff threats, which could escalate trade tensions and weigh on risk sentiment.
A pullback in US Treasury yields pressured the dollar, allowing the euro to recover some ground. Investors scaled back bets on further Federal Reserve tightening, as economic data suggested a possible slowdown, reducing demand for the dollar as a safe haven.
Despite the rebound, Trump’s trade rhetoric kept markets cautious, with the former president’s comments raising concerns over potential tariff hikes on European goods. The uncertainty surrounding US-EU trade relations has added a layer of risk to the euro’s outlook, preventing a stronger rally.
Meanwhile, the European Central Bank (ECB) has maintained a careful stance on policy direction, with officials signaling that inflation remains a concern. While the euro has found short-term support, the ECB’s reluctance to tighten aggressively has limited upside momentum, keeping EUR/USD range-bound.
Looking ahead, traders will focus on upcoming US inflation data and any further developments in Trump’s trade policies. Any signs of stronger US price pressures could reinforce the Fed’s higher-for-longer stance, boosting the dollar and pressuring the euro once again.
For now, EUR/USD remains in recovery mode, but geopolitical uncertainty and trade risks could make further gains difficult. Unless market sentiment shifts decisively, the pair may struggle to break above key resistance levels in the near term.
