EUR/USD Strengthens Sharply As Markets Bet On Tariff Changes
EUR/USD stepped on the gas on Tuesday, jumping 1.4% and gaining 140 pips in one session as markets sold the US dollar and bet that US President Donald Trump would find a reason to walk back his own tariff threats. Key data from Europe and the US are due later in the week, but trade war rhetoric took center stage midweek.
True to form, US President Donald Trump has already begun to change his own tariff threats. A package of 25% tariffs on Canadian and Mexican imports went into effect at midnight EST. However, despite some risk reluctance early in the US session, currency markets quickly recovered and bet big on a reversal or delay of other tariff measures from the Trump administration. Key members of Trump’s team, notably Commerce Secretary Howard Lutnick, admitted to Fox News viewers that tariff changes this week may already be in the works, with President Trump set to announce them on Wednesday.
Economic data on the European side was a thin offering during the midweek market session as Fiber traders struggled to deal with the double whammy of the European Central Bank’s (ECB) March interest rate call on Thursday, as well as the latest iteration of the US Nonfarm Payrolls (NFP) jobs figure, due on Friday. This week’s NFP numbers are likely to draw more attention than usual as investors begin to watch for signs of economic weakness as consumers and businesses begin to buckle under the weight of President Trump’s continued global trade war threats.
Wednesday brings the US ADP Employment Change figure, as well as an update to the ISM Services Purchasing Managers’ Index (PMI) survey results. The ADP jobs number is expected to edge down to 140K from 183K, while the ISM Services PMI is expected to edge down to 52.6 from 52.8.
The ECB is widely expected to cut interest rates by another quarter of a percentage point on Thursday, bringing the main benchmark rate down to 2.65% from 2.9%, and the Deposit Facility Rate is expected to drop by the same amount to 2.5% from 2.75% as the ECB tries to address growing recession risks and try to strengthen the EU's vast and diverse domestic economy.
Source: FXStreet
