- EUR/USD recovers from over two-week lows as traders reassess Trump’s tariff threats.
- US President Trump threatens 30% tariffs on all EU imports starting August 1.
- EU Commission proposes a second tranche of countermeasures targeting €72 billion worth of US imports.
The Euro (EUR) regains ground against the US Dollar (USD) on Monday, after hitting its lowest level in over two weeks earlier in the day, as traders reassess the impact of escalating trade tensions between the United States (US) and the European Union (EU).
The EUR/USD pair came under pressure after US President Donald Trump threatened over the weekend to impose 30% tariffs on European imports starting August 1. However, a modest pullback in the Greenback and cautious optimism around potential negotiations helped the shared currency recover some lost ground during American trading hours.
At the time of writing, the EUR/USD pair is trading around 1.1689, recovering modestly after slipping to an intraday low of 1.1654 during the European session. Meanwhile, the US Dollar Index (DXY), which tracks the value of the Greenback against a basket of six major currencies, is trading flat below the 98.00 psychological mark, as investors turn cautious ahead of key Consumer Price Index (CPI) inflation data and further trade-related developments.
In response to the tariff threats, the EU announced on Sunday that it will extend its suspension of retaliatory tariffs against the United States until early August, aiming to keep diplomatic channels open. President Ursula von der Leyen emphasized that Brussels remains committed to finding a negotiated solution and warned that the proposed 30% US tariff would have “serious consequences” for transatlantic trade. The bloc is said to have a two-step plan in place—starting with €21 billion in targeted tariffs, and a larger €72 billion package that could be used if talks do not lead to an agreement.
European Trade Commissioner Maroš Šefčovič announced on Monday that the European Commission has prepared a second tranche of countermeasures and shared the proposal with EU member states. The list targets approximately €72 billion ($84.1 billion) worth of US imports, significantly broadening the bloc’s readiness to respond if negotiations with Washington fail to yield a resolution.
“Our rebalancing measures on steel and aluminum are suspended until early August,” Šefčovič said at a press briefing in Brussels. “Today, the Commission is sharing with the member states the proposal for the second list of goods… Member states will now begin discussions on the details.”
This second tranche comes in addition to an earlier package of retaliatory tariffs worth €21 billion, primarily focused on US steel and aluminum products. EU officials have stressed that while the bloc remains open to a negotiated resolution, it is fully prepared to defend its economic interests if necessary.
Looking ahead, this week’s economic calendar will be crucial for the direction of EUR/USD, with markets focusing on the US Consumer Price Index release on Tuesday, followed by Eurozone inflation data on Thursday.
Economic Indicator
Consumer Price Index (MoM)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM figure compares the prices of goods in the reference month to the previous month.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
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