EUR/USD Corrects As Trump Tariff Fears Increase Safe-Haven Appeal -

EUR/USD Corrects As Trump Tariff Fears Increase Safe-Haven Appeal

Jan 27, 2025Jeremy ParkinsonFinance0

EUR/USD declines to near 1.0450 as the US Dollar strengthens on risk-aversion mood.

Market sentiment turned cautious after Trump imposed tariffs on Columbia overnight.

Investors will keenly focus on the Fed’s and the ECB’s policy meetings later this week.

EUR/USD corrects to near 1.0450 in Monday’s European session after revisiting a six-week high near 1.0520 on Friday. The major currency pair faces pressure as the US Dollar (USD) starts the week on a positive note amid risk-off market sentiment. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, strives to recover from last week’s losses and jumps to near 107.75.The safe-haven appeal of the US Dollar has increased as United States (US) President Donald Trump’s tariff fears have returned. Trump imposed 25% tariffs on its South American trading partner Columbia overnight after the country refused to accept military flights carrying deportees from the US. However, the White House later reported that the Colombian government agreed to “Trump’s terms of accepting illegal immigrants”, and Trump’s proposed tariffs were “now on hold”, Associated Press (AP) reported.The Greenback also attracts bids on Monday as market sentiment is cautious, with investors awaiting interest rate decisions from the Federal Reserve (Fed) and the European Central Bank (ECB) on Wednesday and Thursday, respectively.According to the CME FedWatch tool, the Fed is certain to keep interest rates unchanged in the range of 4.25%-4.50%. Investors will pay close attention to Fed Chair Jerome Powell’s press conference to determine whether policymakers are comfortable with Trump’s call for immediate rate cuts.On the US economic front, investors will focus this week on the Durable Goods Orders and the Personal Consumer Expenditure Price Index (PCE) data for December and the preliminary Q4 Gross Domestic Product (GDP) data.
Daily digest market movers: EUR/USD declines ahead of Fed-ECB policy meetings

The downside move in the EUR/USD pair at the start of the week is driven by a decent recovery in the US Dollar. Meanwhile, the Euro (EUR) trades lackluster ahead of the ECB’s monetary policy decision. The ECB is widely anticipated to reduce its Deposit Facility rate by 25 basis points (bps) to 2.75%, with the Main Refinancing Operations Rate sliding to 2.9%. This would be the fourth interest rate cut by the ECB in a row.

Traders are confident that the ECB will cut interest rates on Thursday, as Eurozone inflation has remained under control and growth prospects remain sluggish. Market participants will focus on ECB President Christine Lagarde’s press conference for fresh guidance on interest rates and how the central bank will counter the consequences of Trump’s tariffs on the Eurozone. Meanwhile, investors have also priced in three more interest rate cuts this year, coming in the remaining three meetings in the first half of the year.

Investors will also focus on preliminary Eurozone Q4 GDP data, which will be released on Thursday. Economists expect the shared bloc to have grown by 1% compared to the same quarter last year. In the previous quarter, the economy expanded by 0.9%.

Technical Analysis: EUR/USD falls from 1.0500 while the near-term outlook remains bullish EUR/USD falls to near 1.0450 on Monday after posting a fresh monthly high near 1.0520 on Friday. The major currency pair wobbles around the 50-day Exponential Moving Average (EMA), which trades near 1.0460. The near-term outlook of the pair remains firm as it holds the 20-day EMA, which trades around 1.0383. The pair entered a bullish reversal after breaking the January 6 high of 1.0437, which confirmed a divergence between the asset’s price and the 14-day Relative Strength Index (RSI). On January 13, the RSI formed a higher low, while the pair made lower lows.Looking down, the January 20 low of 1.0266 will be the key support zone for the pair. Conversely, the December 6 high of 1.0630 will be the key barrier for the Euro bulls.More By This Author:USD/JPY Rebounds To Near 156.50 As BoJ Refrains From Committing Specific Rate Hike Path EUR/USD Strengthens On Upbeat Eurozone Flash PMI Data, Soft US Dollar USD/JPY Edges Lower To Near 156.30 Ahead Of BoJ’s Policy Decision