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

What to Pay Attention to on June 2? A Breakdown of Fundamental Events for Beginners

Quite a few macroeconomic reports are scheduled for Monday, but only one truly important one. This concerns the U.S. ISM Manufacturing PMI. It's worth recalling that two business activity indices

Paolo Greco 06:07 2025-06-02 UTC+2

GBP/USD Overview – June 2: Another Surprise from Donald Trump

The GBP/USD currency pair experienced low volatility on Friday, but last week's events can already be overlooked — Trump never sleeps. Traders barely had time to recover from last Thursday's

Paolo Greco 03:55 2025-06-02 UTC+2

EUR/USD Overview – June 2: The American Circus Gains Momentum

The EUR/USD currency pair traded calmly on Friday, but this calm will not last long. Last week, particularly on Thursday, another storm erupted in the market, caused by a familiar

Paolo Greco 03:55 2025-06-02 UTC+2

EUR/USD. Hello June: ISM Indices, Eurozone Inflation, ECB Meeting, and May Nonfarms

The economic calendar for the upcoming week is packed with important events. The first week of every month is traditionally the most informative for EUR/USD traders, and June will

Irina Manzenko 01:48 2025-06-02 UTC+2

U.S. Dollar: Weekly Preview

The economic news background in the U.S. will be very strong. It's the beginning of a new month, so reports on business activity, the labor market, job openings, and unemployment

Chin Zhao 00:52 2025-06-02 UTC+2

British Pound: Weekly Preview

The British pound is currently experiencing what is arguably one of its best periods in the last 15 years. Of course, during such a long period, there have been moments

Chin Zhao 00:52 2025-06-02 UTC+2

Euro: Weekly Preview

The euro continues to experience no issues in its current trajectory. I would even say it hasn't had such a good period in quite a long time. Most importantly, this

Chin Zhao 00:52 2025-06-02 UTC+2

XAU/USD. Analysis and Forecast

Gold is declining below the $3300 level today. U.S. PCE data met expectations. A shift in trade flows is helping the U.S. dollar regain positive momentum. This is also undermining

Irina Yanina 17:37 2025-05-30 UTC+2

Inflation Is Almost Under Control

While the euro continues to hold its ground against the dollar, European Central Bank (ECB) Governing Council member Fabio Panetta indicated during an interview today that inflation in the eurozone

Jakub Novak 13:40 2025-05-30 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair is attempting to regain positive momentum today, though traders remain cautious ahead of the key U.S. Personal Consumption Expenditures (PCE) Price Index release. As a preferred inflation

Irina Yanina 13:22 2025-05-30 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.