EUR/USD edged higher on Monday, recovering from recent losses despite fresh tariff threats from US President Donald Trump. The pair was trading near 1.1630 at the time of writing, after bouncing from seven-week lows around 1.1585, as the US Dollar (USD) weakened amid growing uncertainty surrounding US trade policy.
Market sentiment was shaken over the weekend after President Trump warned of imposing an additional 10% tariff on European nations opposing the US annexation of Greenland. European officials responded by signaling potential retaliatory measures, raising concerns over a deepening rift among long-standing allies and increasing tensions within the North Atlantic Treaty Organization (NATO).
These developments have fueled a risk-averse mood in global markets ahead of the Davos Economic Forum. US President Trump and his delegation are expected to meet representatives from several countries affected by the proposed tariffs, with Trump’s speech on Wednesday likely to be a key market event this week.
On the data front, attention in the Eurozone on Monday turns to the final Harmonised Index of Consumer Prices (HICP) reading for December. In the United States, markets remain quiet due to the Martin Luther King Jr. Day bank holiday. Investors will instead focus on key US releases later in the week, including third-quarter Gross Domestic Product (GDP) figures and the Personal Consumption Expenditures (PCE) Price Index, both scheduled for Thursday.
Daily Digest – Market Movers: US Dollar weakens on tariff uncertainty
The US Dollar is the weakest-performing major currency on Monday, as investors trim Greenback positions amid renewed concerns over the economic fallout from unpredictable US trade policy.
European leaders have warned they are prepared to respond if the proposed tariffs are implemented. The leaders of the 27 European Union member states are expected to meet in the coming days to discuss possible countermeasures, a development that could keep markets volatile and drive sharp moves across Euro (EUR) pairs.
From an economic perspective, the Eurozone’s final December HICP data remains the main focus for the day. Inflation is expected to confirm a slowdown to 2.0% year-on-year in December, compared with 2.1% in November. Core inflation is also seen easing to 2.3% from 2.4%, in line with preliminary estimates.
