Dollar Dips, Euro Gains After US Auto Tariffs Announcement
The U.S. dollar edged lower on Thursday, while the euro held steady near a three-week low as traders digested the Trump administration’s announcement of 25% tariffs on imported cars, raising the prospect of an all-out trade war.
At 5:05 AM ET (09:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was slightly lower at 104.077, after hitting a three-week high in the previous session.
Dollar weakens after auto tariffs announcement
The currency market reaction to the tariffs has been mostly muted, but the U.S. imports $474 billion worth of autos in 2024, including $220 billion worth of passenger cars, suggesting the impact could be large.
“It is possible that the FX market is experiencing tariff fatigue, and while it has already been priced in, the muted reaction may be a result of Trump’s statement that next week’s reciprocal tariffs could be quite soft,” analysts at ING said in a note.
"The weak reaction in FX to the tariff news could also suggest that the market is shifting from the effects of the announcement to looking at how the tariffs affect business and consumer confidence and, ultimately, concrete data on consumption and business investment. This will be the story for Q2."
That said, with investors concerned that trade tariffs will hurt U.S. growth and potentially reignite inflation, attention will likely soon turn to U.S. Q4 growth data later in the session, as well as weekly initial jobless claims.
Euro holds steady
In Europe, EUR/USD traded 0.2% higher at 1.0774, bouncing off a three-week low seen earlier in the session, with the single currency holding steady despite the U.S. auto market's woes.
Source: Investing.com
