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EUR/USD backslid one-half of one percent on Monday, falling back below the 1.0500 handle and paring recent gains as broad-market risk sentiment takes a step lower. Trade war headlines are back on the offering following a weekend spat between US President Donald Trump and Colombia over migrant deportations, and newly-minted Treasury Secretary Scott Bessent has immediately pivoted into favoring global tariffs across the board, mere minutes after getting confirmed by the US Senate.The Fed is expected to maintain interest rates for January. However, if Chair Jerome Powell sounds unsure during his mid-week press conference, market hopes for increased Fed rate cuts in 2025 could diminish. Markets have raised expectations for rate cuts this year, with a total of 50 bps anticipated.  Political headlines are affecting markets again as US President Donald Trump engaged in a social media feud with Colombia over the travel conditions of migrants being extradited, threatening 50% tariffs on US-bound Colombian exports. Although the threat proved to be bluster, markets are wary of the rapidity of Trump-imposed tariffs.Late Monday, President Trump reinvigorated trade war fears by announcing plans to impose trade tariffs on key trade industries that the US economy overwhelmingly relies on, including steel, computer chips, aluminum, copper, and other semiconductors. Trump’s insistence that the only way to avoid trade tariffs will be to build production facilities within the US faces a steep uphill climb as the American economy is exorbitantly expensive to operate in, far over and above any purported costs that could be levied onto the US consumers in order to retaliate against countries that export to the US.

EUR/USD price forecast
 EUR/USD’s Monday backslide has dragged Fiber back below 1.0500, halting the pair’s brief bullish reprieve after hitting a 26-month low in mid-January. The 50-day Exponential Moving Average (EMA) near 1.0450 is dragging bids back into the low side as EUR/USD gears up for a bearish turnaround.

EUR/USD daily chart
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