EUR/USD Remains Subdued Around 1.1350 After Two Days of Gains
Date: April 14, 2025
By: Akhtar Faruqui
The EUR/USD currency pair has witnessed a slight decline, currently stabilizing around the 1.1350 mark after experiencing gains over the previous two trading sessions. This downturn comes despite a weakened US Dollar (USD), highlighting the complexities of current market conditions driven by escalating trade tensions between the United States and China.
Overview of Recent Movements
In the Asian trading hours on Monday, the EUR/USD pair dropped slightly, hovering near 1.1360. The initial appreciation of the Euro was attributed to a weakening US Dollar, which has faced increasing pressure due to mounting trade conflicts. Recent announcements concerning tariffs have reignited fears of a global recession, impacting overall market sentiment and trading behaviors.
On Friday, China’s Ministry of Finance implemented a significant increase in tariffs on US goods, jumping from 84% to 125%. This move directly responded to President Donald Trump’s decision to hike tariffs on Chinese imports to 145%, escalating the ongoing trade war between the two nations. In an effort to de-escalate tensions, the European Union (EU) offered a temporary 90-day suspension of planned retaliatory tariffs, mirroring a similar gesture from the US to promote renewed dialogue.
Economic Implications
The situation presents a dire outlook to certain policymakers. Friedrich Merz, the German Chancellor-in-waiting, expressed grave concerns regarding the implications of President Trump’s trade policies. In an interview with Handelsblatt, he stated, "President Trump’s policies are increasing the risk that the next financial crisis will hit sooner than expected." Merz further advocated for a new transatlantic trade agreement, emphasizing the potential benefits of reducing tariffs to zero across the board.
From the US perspective, the economic fallout from the trade war remains uncertain. Minneapolis Federal Reserve President Neel Kashkari discussed these concerns on CBS’s Face the Nation, suggesting that the resolution of trade uncertainties will play a crucial role in determining the economic impact. He referred to it as “the biggest hit to confidence” observed in his extensive career at the Federal Reserve, second only to the initial onset of the COVID-19 pandemic in March 2020. ## Current Market Sentiment
The broader implication of these factors has also influenced the US Dollar Index (DXY), which tracks the USD against a basket of six major currencies. The index has seen continued losses for three consecutive sessions, recently slipping below the 100.00 threshold, approaching a three-year low. Eroding investor confidence is evident as economic indicators come in less favorable, coupled with dovish commentary from central bank officials.
Recent economic data provides a mixed picture of the US labor market. The University of Michigan’s sentiment index fell to 50.8 in April, indicating growing consumer apprehension. Meanwhile, inflation expectations surged, with one-year forecasts reaching 6.7%. Despite a minor reduction in the Producer Price Index (PPI), which rose 2.7% year-over-year in March—down from 3.2% in February—the mixed signals in employment figures, where jobless claims increased to 223,000 while continuing claims reduced to 1.85 million, have added to market hesitance.
Conclusion
As the currency pair continues to grapple with external pressures and domestic economic indicators, traders and investors are urged to remain cautious. The interplay between US-China trade relations, monetary policy reactions, and varying economic data will be critical in shaping the trajectory of the EUR/USD in the coming sessions. Stakeholders are encouraged to monitor these developments closely, as the forex market remains highly sensitive to shifts in geopolitical and economic landscapes.
For ongoing updates and insights, stakeholders can follow our detailed coverage and analysis on the shifting dynamics within the forex market.
Disclaimer: This summary of market conditions does not constitute investment advice. Readers are encouraged to conduct thorough research and consider their financial circumstances before making any investment decisions.
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