The EUR/USD pair edged lower to around 1.0310 during the Asian session on Monday, pressured by a strengthening US dollar. Market focus is now on the Eurozone’s Sentix Investor Confidence data for February and a speech by European Central Bank (ECB) President Christine Lagarde later in the day.
Investor sentiment was rattled after former US President Donald Trump announced on Friday that he plans to impose reciprocal tariffs on multiple countries by midweek, though he did not specify which ones. The move heightened concerns over a potential global trade war, fueling demand for the safe-haven US dollar.
Charu Chanana, chief investment strategist at Saxo, noted that while inflation remains a factor, the broader concern is the uncertainty surrounding a shift toward protectionism. “The immediate concern, however, might not be inflation, as there could be counter effects such as demand slowdown. The bigger concern is the uncertainty and the shift towards a more protectionist world,” she said.
Meanwhile, speculation over further interest rate cuts by the ECB continues to weigh on the euro. ECB Governing Council member Boris Vujcic stated that expectations for three additional rate reductions this year are reasonable, although clarity on the matter may not emerge until the beginning of the second quarter.
Traders are closely monitoring developments around Trump’s tariff policies, particularly his repeated threats targeting Europe. However, JPMorgan economist Nora Szentivanyi pointed out that the specifics—motivation, objectives, timing, and tariff rates—remain uncertain. The European Commission, in response, has warned that it will retaliate “firmly” against any US-imposed tariffs.
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