EUR/USD Outlook: Bearish Trends Intensified by Tariff Concerns
February 11, 2025 – As Economic Data Looms, EUR/USD Experiences Pressure
The EUR/USD currency pair is facing a continued bearish outlook as significant economic and political developments unfold. On Monday, the exchange rate declined towards the critical support level of 1.0277, settling around 1.0300. This downward trend is primarily attributed to growing concerns over tariffs, US inflation data, and Eurozone GDP figures for the last quarter of 2024, expected to impact the sentiment of investors throughout the week.
Political Tensions and Tariff Announcements
The market reacted sharply following US President Donald Trump’s recent announcement regarding the imposition of 25% tariffs on all steel and aluminum imports, which he stated would take effect within the week. This decision comes as part of a broader strategy to address perceived trade imbalances, with Trump indicating that additional tariffs would follow in response to measures enacted by other countries against US products. Expectations of tariffs specifically targeting the European Union have heightened tensions, leading to speculation about retaliatory measures.
French Foreign Minister Jean-Yves Le Drian voiced strong opposition to the impending tariffs, asserting that the EU must defend its interests. He recalled the EU’s response to similar tariffs imposed by Trump in 2018, advocating for a robust counter-strategy should the situation escalate further. “The time has come,” Le Drian stated, emphasizing that engaging in a trade war with the EU would be detrimental to all parties involved.
Economic Data Influencing the Dollar
The evolving tariff landscape is likely to have a pronounced effect on the EUR/USD dynamic, potentially breaching the important support level of 1.02. Critical US inflation data is set for release on Wednesday, with a monthly increase forecasted at 0.3%, which would elevate the annual inflation rate to 2.9%. A stronger-than-expected inflation reading could bolster the US dollar, further weakening the EUR/USD pair.
Recent US jobs and wages figures, which surpassed analysts’ expectations, have added to the likelihood that the Federal Reserve may refrain from additional interest rate cuts this year. Consequently, this has supported an uptick in both US bond yields and the value of the dollar against its European counterpart.
Implications for Monetary Policy
As the week progresses, investors will be keenly attentive to comments from Federal Reserve Chairman Jerome Powell, who is slated to address lawmakers on Tuesday and Wednesday. Powell’s stance on interest rate adjustments, especially in the context of the ongoing tariff situation, may significantly influence market sentiment and trading decisions.
Over in Europe, insights from European Central Bank (ECB) officials, including speeches from President Christine Lagarde and member Isabel Schnabel, are also anticipated. Both figures are expected to highlight predictions that the ECB will outpace the Fed in 2025—a scenario that continues to fuel the depreciation trend of the euro against the dollar.
Upcoming European Economic Indicators
The economic landscape for the Eurozone will further unfold with the anticipated employment data due on Friday. Projections indicate a stagnant quarterly growth rate of 0%, which would signify no growth for two consecutive quarters. If the employment figures show a decline between 0.1% and 0.2%, the euro could face additional pressure, reinforcing speculation that the ECB may implement more aggressive interest rate cuts than previously anticipated.
Technical Analysis: Bearish Sentiment Prevails
From a technical perspective, the outlook for the EUR/USD remains decidedly bearish. Should the pair breach the support levels at 1.0245 or 1.0180, it may accelerate movements towards parity sooner than analysts expect. Currently, the nearest resistance levels are identified at 1.0410 and 1.0550. Signs suggest that the downward trend is likely to persist as the market reacts to the aforementioned economic developments.
Conclusion: A Cautious Trading Approach
In conclusion, the EUR/USD is characterized by notable selling pressure as market participants remain apprehensive about the potential for escalating tariffs and their subsequent economic effects. As traders prepare for what could be a pivotal week of trading, closely monitoring economic indicators and political developments will be crucial for informed decision-making in the foreign exchange market.
For those considering trading the EUR/USD, it is recommended to explore options with reputable European brokers that provide robust analysis and strategic insights into the evolving forex landscape.
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