EUR/USD falls to 1.0200, multi-week low amid Trump's trade tariffs | 03 Febrero 2025

Event to pay attention to today:

17:00 EET. USD - ISM Manufacturing PMI

EURUSD:

EUR/USD was subjected to heavy selling on Monday and fell towards 1.0200 early in the Asian session. Spot prices have returned to more than two-year lows reached in January and look set to continue their multi-month downtrend.

The US Dollar (USD) is rising across the board in response to US President Donald Trump's decision over the weekend to impose 25 per cent duties against Canada and Mexico, as well as an additional 10 per cent against China. This marks the start of a new global trade war and has curbed investor appetite for risky assets. The flow of anti-risk sentiment is putting good pressure on the safe-haven quid, which is becoming a key factor putting downward pressure on EUR/USD.

Meanwhile, on Friday evening, Trump announced that he will impose tariffs on goods from the European Union. This comes amid the European Central Bank's (ECB) stance, which continues to undermine the common currency. As expected, the ECB cut borrowing costs by 25 basis points (bps) last Thursday and left the door open for further rate cuts before the end of this year.

This is a significant divergence from the Federal Reserve's (Fed) pause, which favours dollar bulls and supports the prospects for further EUR/USD declines. Meanwhile, the recent sharp pullback in US Treasury yields acts as a headwind for the quid and may provide some support to spot prices. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.

Trade recommendation: Trading mainly with Sell orders from the current price level.

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