The EUR/USD pair declined to around 1.0880 during the Asian session on Thursday as mounting trade tensions between the United States and the European Union (EU) weighed on the Euro. Market participants are closely watching the upcoming US Producer Price Index (PPI) and Initial Jobless Claims data for further direction.
Trade War Intensifies as US Threatens Retaliation
US President Donald Trump reaffirmed his stance on trade tariffs, warning that the US would respond to the EU’s countermeasures against his recently imposed 25% tariffs on steel and aluminum. The European Commission retaliated on Wednesday by announcing tariffs on $28.4 billion (€26 billion) worth of US goods, including bourbon, motorbikes, and boats. These measures are set to take effect on April 1, with additional countermeasures expected in mid-April.
US Recession Fears Limit Dollar Strength
While the trade dispute has pressured the Euro, concerns that Trump’s protectionist policies could push the US economy into recession are limiting the Dollar’s gains. Amarjit Sahota, executive director at Klarity FX, noted that despite recent inflation data coming in softer than expected, market sentiment remains fragile and highly reactive to geopolitical developments.
Key Data to Drive Market Sentiment
Traders will look to the upcoming US PPI and labor market data for further clues on Federal Reserve policy. Any signs of economic weakness could reignite rate-cut expectations, impacting the USD’s trajectory. For now, the EUR/USD pair remains vulnerable to trade-related headlines and broader market sentiment.
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