The EUR/USD pair is holding firm around the 1.1700 level during Tuesday’s Asian session, extending the gains made on Monday. The euro continues to benefit from a pullback in the US Dollar (USD), which weakened following renewed trade tensions between the United States and the European Union.
The US Dollar Index (DXY), which measures the greenback’s strength against a basket of six major currencies, is trading flat near 97.88 after retreating from a recent high of 99.00 reached late last week.
Tensions between the two economic giants flared after a Wall Street Journal report revealed that US President Donald Trump is now pushing for baseline tariffs between 15% and 20%, up from the previously discussed 10%. Additionally, the administration has refused to ease the existing 25% tariff on automobiles, further straining relations.
In response, European officials are preparing retaliatory measures. Germany, which had previously taken a more measured stance, has now aligned with France and other member states in favor of a tougher approach. “If they want war, they will get war,” a German official reportedly told Bloomberg, highlighting the growing resolve within the bloc.
On the monetary policy front, traders are now turning their attention to the European Central Bank (ECB), which is set to announce its latest policy decision on Thursday. While the ECB is widely expected to keep interest rates unchanged, investors will closely watch President Christine Lagarde’s remarks for signals on the rate outlook for the rest of the year.
Meanwhile, in the US, market participants anticipate the Federal Reserve will maintain its benchmark interest rate between 4.25% and 4.50% during next week’s policy meeting, as inflation data and global uncertainties continue to shape the central bank’s cautious stance.
