EUR/USD Under Pressure as Trump’s Tariff Plans Shake Market Confidence

EUR/USD continues to decline for a third straight day as global investors react to new tariff threats from U.S. President Donald Trump. The risk-off mood, driven by trade concerns and strong U.S. labor data, has strengthened the U.S. Dollar, sending the Euro further into correction territory.

At the time of writing, EUR/USD trades near 1.1680 after touching an intra-day low of 1.1665 during the Asian session. The pair has fallen nearly 0.8% this week, pulling back from its high of 1.1830 seen on July 1. The decline reflects investors’ concerns about escalating trade tensions and decreasing hopes for interest rate cuts from the Federal Reserve.

Tariff Worries Hit Risk Sentiment and the Euro

Markets took another hit after Trump revealed that the European Union (EU) will be included in a new round of U.S. tariffs. The blanket tariff rate will be raised to 15–20%, up from the current 10%. These comments, made during a televised interview, raised doubts about the progress of ongoing trade negotiations between the U.S. and the EU.

EU officials remain hopeful that a deal can be reached before the August 1 deadline. Still, investors are pricing in higher risk, favoring safe-haven assets like the U.S. Dollar and putting downward pressure on EUR/USD.

In Europe, inflation data continues to show mixed results. France’s Consumer Price Index (CPI) increased 0.4% in June, with the annual rate revised slightly higher to 0.9%. Germany’s inflation eased to the ECB’s 2% target year-on-year, while monthly data remained flat.

Meanwhile, ECB officials appear divided. Fabio Panetta supports further policy easing if growth remains weak, while Isabel Schnabel signaled no further cuts unless inflation trends shift significantly.

Strong U.S. Jobs Data Supports the Dollar

U.S. jobless claims data released on Thursday showed surprising strength. Initial claims fell to 227,000, a drop of 6,000 against expectations of an increase. The data points to a robust labor market and reduces the likelihood of immediate rate cuts by the Fed.

Market expectations for a July rate cut are now below 5%, according to the CME FedWatch tool. September’s expectations have also fallen slightly. However, there is division among Fed officials:

• Fed Governor Waller supports a July rate cut, saying tariff-driven inflation is temporary.
• San Francisco Fed President Daly sees room for two cuts by year-end.
• St. Louis Fed President Musalem urges caution, suggesting it’s too early to determine long-term effects.

These comments reflect the Fed’s mixed outlook, adding more complexity to the market reaction.

For now, EUR/USD remains locked in a downward trend, forming lower highs and lower lows within a broadening wedge pattern. Support lies between 1.1660 and 1.1650. A clear break below that zone could open the door to deeper losses in the coming sessions.

EUR/USD will remain sensitive to both trade headlines and central bank commentary as traders seek direction. With inflation data soft in Europe and U.S. job numbers strong, the path forward looks increasingly uncertain for the Euro.

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