Euro Strengthens as Trump Tariff Uncertainty Pressures USD
The EUR/USD pair strengthened again on Wednesday (February 25th) in the Asian session and briefly surged to the 1.1800 area, reversing the previous day's slight weakness. The main driver came from the weakening US dollar, as markets remained nervous about the uncertainty surrounding Washington's rapidly changing trade policy.
Following a US Supreme Court ruling limiting the previous tariff scheme, President Donald Trump introduced a temporary 10% global tariff effective for 150 days under Section 122, while signaling that the administration was working on an increase to 15%. This combination of "temporary tariffs + potential escalation" sparked concerns about retaliation from trading partners and supply chain disruptions, ultimately pressuring the USD and giving the euro some breathing room.
In terms of US monetary policy, the Fed's tone remained cautiously hawkish: the January FOMC minutes showed some officials believed additional easing was unnecessary until there was evidence of disinflation returning to its normal course. Several Fed officials also emphasized the stance of "holding interest rates at current levels for the time being," providing support for the USD—but offset by the burden of tariff uncertainty.
In Europe, sentiment on the euro was buoyed after Christine Lagarde said Eurozone inflation and ECB interest rate policy were in a "good place," signaling that no policy changes were under consideration. However, EUR/USD's upside could be limited as the European Parliament delayed action on the EU-US trade deal while awaiting clarity on the new US tariff regime—leading the market to avoid overly aggressive bullish positions.
The next focus will be on Eurozone final inflation, German final GDP, and consumer sentiment indicators (GfK), followed by comments from Fed officials in the North American session. With a mixed fundamental backdrop (rates vs. Fed/ECB), the market tends to be more sensitive to headlines and data, so short-term volatility remains potentially high. (alg)
Source: Newsmaker.id
