empty
05.02.2025 12:23 AM
Euro in the Crosshairs

To impose or not to impose—that is the question. Will Donald Trump implement tariffs, or will he abandon them? The fate of the EUR/USD exchange rate depends on this decision. Europe has become a new target for threats from the Republican president, leading to a continued decline of the euro. Although the implementation of import tariffs on Mexico and Canada has been postponed from February to March, granting some reprieve to the U.S. neighbors, it remains uncertain if the White House will take a similar lenient approach with other countries and regions.

Despite the prevailing bearish sentiment surrounding EUR/USD, the effects of Donald Trump's protectionist policies are already reflected in the pair's exchange rate. This suggests that if tariffs against the EU are not introduced, the euro may have a chance to rebound. Unsurprisingly, investors are feeling anxious, and the volatility of the euro is steadily increasing, mirroring the volatility seen in the Australian dollar.

Euro and Australian Dollar Volatility Trends

This image is no longer relevant

The Australian dollar often serves as an indicator for the Chinese yuan, experiencing declines due to Trump's 10% tariffs on China. Similarly, the eurozone faces challenges; its export-driven economy tends to suffer more when a major buyer like China has difficulties. Currently, China is facing increasing issues. While its retaliatory tariffs on U.S. oil and agricultural equipment may not have a significant impact, they send a clear message: Beijing is not willing to back down easily.

On a positive note for the euro, French Prime Minister Francois Bayrou successfully pushed the budget through parliament. A vote of no confidence in the government is likely to be rejected since the socialists have indicated that they will not support it. Consequently, the yield spread between French and German bonds has decreased to 70 basis points.

French-German Bond Yield Differential Trends

This image is no longer relevant

Citigroup believes that this indicator will soon rise due to political, economic, fiscal, and credit rating risks, which could put additional pressure on the EUR/USD currency pair.

As the saying goes, trouble often comes in multiples. If the eurozone's fragile economy, the European Central Bank's commitment to aggressive monetary easing, and threats of tariffs are further complicated by political turmoil in France and Germany, the EUR/USD pair could face serious challenges. However, for the moment, the main currency pair is holding steady, especially since the White House has postponed tariffs against Mexico and Canada.

This image is no longer relevant

In my opinion, if a similar situation occurs with China, the bulls will find a new opportunity to take action. That said, Donald Trump has demonstrated that he is a decisive leader who is unlikely to issue empty threats. Tariffs will be implemented—possibly just a little later than expected.

From a technical standpoint, the daily EUR/USD chart shows that the bulls are trying to form an internal pin bar. A breakout above the upper boundary at 1.035 could signal a short-term buying opportunity. Conversely, if the euro drops below $1.030, it would indicate a signal to sell.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

GBP/JPY. Analysis and Forecast

During the European session on Monday, the GBP/JPY currency pair is approaching the 198.30 level. The pair finds some support from UK housing data: in June, house prices rose

Irina Yanina 19:40 2025-07-07 UTC+2

XAU/USD. Geopolitical Risks May Provide Additional Support to the Safe-Haven Precious Metal

Today, gold is displaying an intraday bearish tone despite rebounding from the $3300 level. Strengthening demand for the US dollar remains the primary factor pressuring gold, limiting its upward movement

Irina Yanina 19:09 2025-07-07 UTC+2

Bitcoin leads turbulent life

Beneath the calm surface of BTC/USD lie turbulent underwater currents that are reshaping the cryptocurrency market structure. Still waters run deep. On the surface, it seems that life

Marek Petkovich 15:48 2025-07-07 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair maintains a bullish bias, staying above the psychological level of 145.00, reflecting intraday selling pressure on the Japanese yen amid U.S. dollar strength. Investors are concerned that

Irina Yanina 12:59 2025-07-07 UTC+2

USD/CAD. Analysis and Forecast

On Monday, the USD/CAD pair continued its upward movement for the second day in a row. This rise is driven by a combination of factors. Crude oil prices initially declined

Irina Yanina 12:39 2025-07-07 UTC+2

GBP/USD. Analysis and Forecast

The GBP/USD pair began the new week attempting to hold the key psychological level of 1.3600. However, amid mixed fundamental factors, it has not been successful so far. The British

Irina Yanina 12:14 2025-07-07 UTC+2

Three days left to avert tariffs

As July 9, the deadline set by Trump, approaches, the United States main trading partners spent the weekend rushing to finalize trade agreements or lobbying for more time. Meanwhile, Treasury

Jakub Novak 11:24 2025-07-07 UTC+2

Investors see no alternatives

Uncertainty is commonly the enemy of investment, but not in 2025. A double dose of unpredictability – from geopolitics and White House tariffs – hasn't stopped the S&P 500 from

Marek Petkovich 11:17 2025-07-07 UTC+2

What to Watch on July 7th? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic publications are scheduled for Monday, and none of them are significant. Let us recall that Friday was practically a semi-holiday, as the United States celebrated Independence

Paolo Greco 08:29 2025-07-07 UTC+2

GBP/USD Overview on July 7, 2025

The GBP/USD currency pair remained nearly flat throughout Friday, as the U.S. trading session was essentially inactive on that day. There were no macroeconomic publications, and the market chose

Paolo Greco 07:25 2025-07-07 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.