EUR/USD Retreats Below 1.1700 as US Tariff Threats Rattle Markets

The Euro came under renewed pressure early Friday, with EUR/USD slipping toward 1.1680 during the Asian session as traders responded to fresh tariff warnings from the United States and cautious signals from the European Central Bank (ECB).

Trump Targets EU in Expanding Tariff Campaign

Market sentiment soured after U.S. President Donald Trump signaled his administration would notify European Union (EU) members “today or tomorrow” about newly imposed tariff rates. This follows a wave of letters sent earlier in the week to over 20 countries, which included hefty 50% tariffs on Brazilian imports, 35% on Canadian goods, and a similar 50% levy on copper set to take effect August 1.

As the EU remains the largest trading partner of the United States, traders are closely watching for retaliatory responses or trade concessions. The uncertainty has weighed on the Euro, dragging EUR/USD back below the 1.1700 threshold despite broader weakness in the US Dollar.

ECB Officials Push Back on Further Rate Cuts

While tariff tensions build, the ECB is signaling growing caution around monetary easing. ECB Governing Council member Robert Holzmann stated earlier this week that there is “no need” to cut interest rates further, arguing that current borrowing costs already provide sufficient support to the Eurozone economy.

Adding to the narrative, ECB policymaker Joachim Nagel emphasized the importance of a data-dependent, meeting-by-meeting approach amid heightened global uncertainty. This balanced stance may offer some cushion to the Euro in the near term, limiting downside risk from external trade shocks.

Outlook: Tariff Developments in Focus

Looking ahead, the spotlight will remain firmly on US-EU trade negotiations. Any escalation in tariff measures could amplify downside pressure on the EUR/USD pair. However, should the ECB maintain its cautious policy stance while the Federal Reserve leans toward easing, the Euro may find support near key levels.

Later in the day, speeches from ECB policymakers Fabio Panetta and Piero Cipollone will be monitored for further clues on rate policy, while investors brace for potential announcements from the White House regarding Europe-bound tariffs.

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