EUR/USD holds onto gains near 1.1700 amid US-EU trade tensions

EUR/USD trades firmly after Monday’s recovery move around 1.1700 despite escalating US-EU trade tensions.
US President Trump has demanded an increase in the baseline tariff rate from 10% to 15-20% on imports from the EU.
Both the ECB and the Fed are expected to leave interest rates steady in the policy meeting this month.

Sagar Dua FXStreet

The EUR/USD pair clings to gains made on Monday around 1.1700 during the Asian trading session on Tuesday. The major currency pair strengthens as the US Dollar (USD) corrects sharply, following a fresh escalation in trade tensions between the United States (US) and the European Union (EU).

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades flat around 97.88 on Tuesday. The DXY has corrected from its almost a month high of 99.00 in the last two trading days.

Trade tensions between giant economies escalated after a report from the Wall Street Journal (WSJ) signalled that US President Donald Trump has demanded a higher baseline tariff in a range between 15% and 20% against 10%, which was being negotiated earlier. Additionally, Trump has been reluctant to reduce the 25% automobile levy.

This has forced EU officials to accelerate their plans of retaliation to safeguard their interests. In response, Germany — previously one of the more cautious voices in the bloc — has now aligned itself with France and others pressing for a tougher stance. As one German official told The Journal: “If they want war, they will get war,” Bloomberg reported.

On the domestic front, investors await the European Central Bank’s (ECB) monetary policy decision, which will be announced on Thursday. The ECB is almost certain to leave its key borrowing rates steady, while investors will closely monitor the monetary policy statement and President Christine Lagarde’s press conference to get cues about the likely interest rate outlook in the remainder of the year.

In the United States (US), traders are confident that the Federal Reserve (Fed) will keep interest rates on hold in the current range of 4.25%-4.50% in the policy meeting next week.

Economic Indicator

ECB Rate On Deposit Facility

One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.

EUR/USD edges lower below 1.1650 as Middle East tensions fuel US Dollar strength

The EUR/USD pair trades in negative territory around 1.1635 during the early Asian session on Thursday. The US Dollar strengthens against the Euro as escalating Middle East conflict boosts safe-haven flows. Traders brace for the Eurozone Retail Sales and US weekly Initial Jobless Claims reports, which will be released later on Thursday.

GBP/USD tests key moving averages as growth downgrade weighs

GBP/USD was nearly flat on Wednesday, edging up 0.08% to settle around 1.3370 in a quiet session. The pair has fallen sharply from its late-January high near 1.3870 and is now testing the 200-day Exponential Moving Average, with this week's one-week forex heatmap showing Pound Sterling as one of the worst performers against the US Dollar, down about 1.4% on the week.

Gold benefits from a retreating USD; reduced Fed rate cut bets cap gains

Gold attracts some buyers for the second consecutive day on Thursday amid a modest US Dollar pullback from an over three-month high, though it remains below the $5,200 mark. Wednesday's upbeat US macro data further tempered hopes for three rate cuts by the Fed in 2026. Furthermore, escalating Middle East tensions might continue to benefit the USD's status as the global reserve currency and contribute to capping the bullion.