EUR/USD remains under pressure, trading around 1.0380 during the Asian hours on Tuesday after trimming some of its recent losses. The Euro (EUR) continues to face headwinds as dovish expectations for the European Central Bank (ECB) dominate market sentiment. Investors are anticipating a 25 basis point (bps) rate cut at each of the next four ECB policy meetings, driven by concerns about the Eurozone’s economic prospects and subdued inflationary pressures.
These dovish expectations have been reinforced by growing confidence that Eurozone inflation will sustainably return to the ECB’s 2% target, alongside rising uncertainty regarding potential tariff policies from the United States (US).
US Dollar Index Gains Ground, Trump’s Tariff Review Adds Fuel
The US Dollar Index (DXY), which tracks the Greenback’s performance against six major currencies, has risen to around 108.30. The US Dollar regained momentum after recent losses, supported by news that President Donald Trump plans to direct federal agencies to review tariff policies and reassess trade relationships with Canada, Mexico, and China.
However, the Greenback faced some resistance following a Bloomberg report indicating that Trump will not immediately impose new tariffs after his inauguration. The US Federal Reserve (Fed) is expected to hold its benchmark interest rate steady in the 4.25%-4.50% range during its January meeting, although investors speculate that Trump’s policies could trigger inflationary pressures, potentially limiting the Fed to just one additional rate cut.
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