The EUR/USD currency pair struggles to maintain momentum following its rebound from a three-week low near 1.0730, edging lower in Asian trading on Friday. Spot prices hover below the 1.0800 mark, exhibiting a mild bearish bias as investors await the release of the US Personal Consumption Expenditure (PCE) Price Index.
The upcoming inflation data is expected to provide key insights into the Federal Reserve’s monetary policy trajectory, potentially influencing the US dollar’s near-term movement and shaping the EUR/USD pair’s direction. In the interim, repositioning ahead of the data supports the dollar, halting its retracement from a multi-week high. Additionally, risk aversion fueled by concerns over the economic fallout from US President Donald Trump’s tariff policies bolsters demand for the safe-haven greenback.
Meanwhile, the euro faces pressure amid escalating trade tensions between the US and the European Union. Trump announced a 25% tariff on imported cars and light trucks, effective next week, in addition to recent duties on steel and aluminum. The EU has vowed to retaliate with counter-tariffs on US imports, raising fears of a full-blown trade conflict, further weighing on the shared currency.
Despite this, the dollar’s gains remain limited amid concerns that Trump’s aggressive trade stance could stifle US economic growth, potentially prompting the Federal Reserve to cut interest rates sooner than expected. Markets are increasingly factoring in the possibility of rate cuts at the Fed’s June, July, and October meetings. These expectations keep USD bulls in check, preventing significant downside movement in the EUR/USD pair.
Nonetheless, the pair remains on course for a second consecutive weekly decline, underscoring lingering uncertainty in global markets.
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