EUR/USD Bound for 1.1400 as Trump Eases EU Tariff Threat

EUR/USD Bound for 1.1400 as Trump Eases EU Tariff Threat

EUR/USD started the week on a strong note, reaching a four-week high of 1.1420 after US President Donald Trump postponed his threat to impose 50% tariffs on EU imports. The decision, announced over the weekend, has temporarily eased market concerns over a potential escalation in transatlantic trade tensions.

The currency pair is now trading around 1.1390, up 0.20% on the day, as the US Dollar weakens in thin holiday trading. Trump's initial threat, issued late Friday, caused volatility in the market, but a Sunday call with European Commission President Ursula von der Leyen led to a temporary reprieve. The new deadline for potential tariffs is now set for July 9.

The Greenback’s decline has been a tailwind for the Euro, which continues to gain support from improved sentiment and a more stable risk environment. Adding to the Euro’s strength, European Central Bank (ECB) President Christine Lagarde stated that the Euro has the potential to challenge the US Dollar’s dominance as the global reserve currency. However, she emphasized this would require deeper financial integration and stronger political unity within the EU.

Meanwhile, Minneapolis Fed President Neel Kashkari warned of stagflation risks due to prolonged trade tensions and tariff policies. The Federal Reserve’s policy outlook for September remains uncertain as inflation concerns persist alongside sluggish growth indicators.

With market liquidity still low due to holidays in the US and UK, price movements may remain limited in the short term. However, traders are closely watching further developments on the trade front and any signals from central banks.