EUR/USD: Euro Eyes $1.10 as Dollar Sinks in Muddy Tariff Waters, Traders Brace for Volatility

Trump’s jawboning is sending the dollar lower as traders don’t discount potential volatility ahead. Wednesday will be big.

📈 Euro Rises Against Dollar

• The EURUSD pair grabbed its chance to rise on Tuesday as traders were scrambling to figure out what’s happening with the US dollar and the looming trade war between US, on the one side, and China and Europe, on the other.
• This morning, the euro was flexing its muscles against the greenback, climbing steadily toward the $1.10 mark as renewed tariff tensions weighed heavily on forex markets. Traders were ditching the dollar like it’s a bad stock pick, with Washington’s latest volley of trade threats muddying the outlook for US economic stability.

📢 Tariff Jitters Escalate

• US President Donald Trump on Monday said he’s looking to ramp up the tariff war against China by an additional 50%. This means that some imported goods will now be 120% more expensive on their way to the US. China didn’t stay tight-lipped on the matter. It threatened to retaliate.
• “If the US proceeds with implementing these escalated tariff measures, China will resolutely take countermeasures to safeguard its own rights and interests,” a spokesperson said on Tuesday. “If the US insists on going its own way, China will fight to the end.”
• Europe chimed in on Monday with a proposal to introduce a 25% tariff on a range of US goods, including diamonds, eggs, poultry and … dental floss and sausages? Anyway, these are a response to Trump’s 25% tariff on steel and aluminum.

🤫 Don’t Discount Volatility

• Volatility in forex is bound to persist as Trump’s 50% extra tariffs on China are expected to take effect as soon as Wednesday, unless Beijing backs out (which it said it won’t be doing).
• The dollar hasn’t been doing well these past couple of months — ever since traders got wind of tariff talks it has retreated about 8% against the euro. These extra tax charges are seen as a move that can spark inflationary pressures, throw the US economy in a recession and hurt trade all around the globe where the US is the reserve currency.