EUR/USD gathers strength to near 1.1400 as Trump delays EU tariffs

EUR/USD edges higher to around 1.1395 in Tuesday’s Asian session.
The Euro hits its highest since late April after Trump delayed the imposition of 50% tariffs on European Union shipments.
Concerns over the mounting US national deficit exert some selling pressure on the Greenback.

Lallalit Srijandorn FXStreet

The EUR/USD pair trades in positive territory near 1.1395 during the Asian trading hours on Tuesday. The Euro (EUR) edges higher to the highest since late April against the US Dollar (USD) after US President Donald Trump delayed the imposition of 50% tariffs on Europe. The US Conference Board’s Consumer Confidence for May will be published later on Tuesday.

Reuters reported on Sunday that Trump announced his decision to delay EU tariffs until July 9 after a call with European Commission President Ursula von der Leyen. The development offers some relief to markets and provides some support to the shared currency against the USD.

“Following Trump's latest U-turn, we will, of course, have to wait and see what happens next. It is possible that a deal with the European Union will be reached by 9 July," said Commerzbank currency strategist Michael Pfister.

Trump’s dubbed “Big, Beautiful Bill,” which is calculated to add about $3.8 trillion to the federal government's $36.2 trillion in debt over the next decade. This fuels concerns over the mounting US national deficit and continues to undermine sentiment towards US assets, including the USD.

Traders will closely monitor the progress of US trade policy, as July 9 is the end of the 90-day pause on Trump's April 2 "Liberation Day" levies on the EU. Any signs of escalating trade tension could weigh on the Euro against the USD.

Euro FAQs

What is the Euro?

The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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