EUR/USD under pressure while Trump’s tariff threats reinforce the US dollar

• The EUR/USD goes back to minimum of two weeks as risk aversion raises the demand of the US dollar.
• Commercial tensions intensify as President Trump indicates general tariffs of 15–20% to nations that have not yet received formal tariff letters.
• The markets do not foresee interest rates on the part of the ECB at the July meeting, and only 25 basic flexibility points are discounted in the next 12 months.

The euro (EUR) goes back against the US dollar (USD) on Friday, pressed by renewed tariff threats of the United States (USA) and a broader wave of risk aversion that has raised the demand for the dollar. As investors digest the commercial rhetoric in climbing of US President Donald Trump, including possible new tariffs on European imports, the feeling of the market has become cautious, feeding flows to the safe shelter in the dollar and dragging the EUR/USD towards its lowest levels in two weeks.

The EUR/USD torque is consolidating below the 1,1700 brand, struggling to find a new bullish impulse amid high commercial tensions. At the time of writing, the torque is around 1,1687 during the American negotiation hours, since the state of broader risk and the strongest American dollar keep the currency shared under pressure.

Meanwhile, the US dollar index (DXY), which tracks the value of the dollar against a basket of six main currencies, remains firm around the level of 97.80.

The last round of US tariff threats continues to destabilize global markets, with the euro keeping under pressure. It is reported that President Trump is preparing to soon send a formal notice to the European Union (EU). He pointed out that all the remaining commercial partners who have not yet received letters of specific tariffs or finished trade agreements will be affected by general tariffs of 15% or 20%. This movement follows its previous announcement of a 35% tariff on Canadian imports, which has climbed commercial tensions in general. While the EU has expressed its willingness to end a commercial framework to avoid confrontations, uncertainty remains high.

In the front of the monetary policy, the officials of the European Central Bank (ECB) offered divergent visions about the policy perspectives on Friday, reflecting internal differences on the way forward. The member of the Executive Board, Isabel Schnabel, adopted a firmly aggressive tone, stating that “the bar for another rate cut is very high” and dismissing the need for greater flexibility unless inflation is materially diverted from the goal of 2% of the medium -term ECB, something that currently does not see evidence. In contrast, the member of the Governing Council, Fabio Panetta, adopted a more cautious approach, pointing out that if the downward risks intensify and reinforce the deflationary pressures, a greater monetary flexibility would be justified. Despite the divergence, the markets are valuing virtually no possibility of a cut in the next ECB meeting on July 24, and see only 25 basic points of total flexibility in the next 12 months.