- The EUR/USD falls to 1,1296 after Trump announces elevated tariffs on EU imports from June 1.
- The pair bounces to 1,1350 while the US dollar is pressed by the increase in concerns about the fiscal deficit.
- The euro ignores rumors about ECB rates cuts, supported by the improvement of German GDP figures.
The EUR/USD recovered during the North America average session on Friday after falling below 1,1300 after the announcement of US President Donald Trump, who shook the markets by threatening to impose 50% tariffs on the European Union (EU). At the time of writing, the pair recovered and climbed around 1,1350
The president of the United States, Donald Trump, published on his early social network on Friday that the discussions with the European Union “are not going anywhere. Therefore, I am recommending a direct tariff of 50% to the European Union, as of June 1, 2025,” he wrote. The EUR/USD fell to 1,1296 after his comments before the upward trend resumed.
After those comments, the US Treasury Secretary, Scott Besunt, said that “EU proposals have not been of good quality,” adding that “most countries are negotiating in good faith, except the EU.”
The dollar remains defensive, affected by the approval of Trump’s fiscal bill in the House of Representatives, which is on their way to the Senate. If approved, the proposal would add about 4 billion dollars to the US debt limit in a decade, according to the Congress Budget Office (CBO).
It is worth noting that the US dollar still does not react to the comments of the speakers of the Federal Reserve (FED), who have so far said that the US Treasury Bond market is working in an orderly manner, adding that the uncertainty about supply chains, inventory and inflation keeps business executives without knowing what to expect from the future.
The US economic agenda presented housing data in May, which were mixed, since construction permits fell, but sales of new houses improved in April.
In the euro zone, the Gross Domestic Product (GDP) of Germany improved annually, although it remained in contraction territory.
Meanwhile, the euro ignored the speculations that the European Central Bank (ECB) is expected to reduce interest rates in the next meeting. Rehn and Stournaras of the ECB favor a rate cut in June, being the latter supporter of a pause after that meeting.
Daily market movements EUR/USD: the euro favored by the tendency to “sell America”
- The euro is still favored by the general weakness of the US dollar. The American dollar index (DXY), which tracks the yield of six currencies against the American dollar, fell 0.79% to 99.10, its lowest level from April 29.
- The tendency to “sell America” ​​continues with investors getting rid of bonds, US shares and the US dollar. It was lit by the “commercial war” of President Donald Trump and the reduction of Moody’s of the debt of the US government of AAA to AA1.
- The US Agenda presented construction permits, which fell by 4% intermencing in April, decreasing from 1,481 million to 1,422 million, indicating a slowdown in future construction activity.
- The sales of new houses increased by 10.9% intermensual, rising from 0.67 million to 0.743 million, according to the US Census Office, this reflects a strong demand in the housing market despite the most tight supply conditions.
- Germany’s economy grew in the first quarter of 2025, exceeding estimates due to exports and the anticipation of the industry before US tariffs. The Gross Domestic Product (GDP) improved from 0.2% to 0.4% intertrmetral.
EUR/USD technical perspective: Ready to challenge 1,1400 in the short term
The EUR/USD bullish trend resumed on Friday, with the torque reaching a maximum of two weeks of 1,1375 while the operators prepare to challenge 1,1400. Buyers are gaining impulse as the torque registered the maximum and minimum higher during the last five days, and this is confirmed even more by the relative force index (RSI), which tends to rise before it becomes overlapping.
If the EUR/USD exceeds 1,1400, it would pave the way to test key resistance levels, such as 1,1450, followed by the 1,1500 mark and the maximum of the year to date (YTD) in 1,1573.
On the contrary, if the EUR/USD falls below 1,1300, the pair could prove the minimum of May 22, 1,1255, before 1,1200.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
