The euro surged to a multi-month high against the US dollar in early Thursday trading, gaining approximately 1.3%. This strengthening of the single currency follows Donald Trump’s announcement of a sweeping package of tariffs on imports from a wide range of countries. The tariffs, described as reciprocal, include a 20% levy on EU goods, set to be implemented in two stages—an initial 10% on 5 April, followed by the full reciprocal rates on 9 April. The greenback’s weakening after this announcement suggests that investors see a more significant growth risk for the US than previously anticipated, potentially forcing the Federal Reserve to cut rates more aggressively than initially forecast. This is a significant shift, indicating that investors perceive the main downside of these tariffs for the US to be slower economic growth rather than higher inflation.
Meanwhile, across the Atlantic, the outlook is different. Traders anticipate increased fiscal stimulus in Europe, which is providing additional support to the single currency. Against this backdrop, FX markets are likely to experience heightened volatility as the full tariffs take effect on 9 April, with further significant negotiations—and possibly new developments—expected in the lead-up to their implementation.
Ricardo Evangelista – Senior Analyst, ActivTrades
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Source: ActivTrader
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