EUR/USD trades sideways around 1.0830 in Monday’s European session as investors await the announcement of planned reciprocal tariffs by United States (US) President Donald Trump on Wednesday. Investors expect President Trump to impose significant tariffs on the Eurozone as he has criticized the European Union (EU) for not buying American goods.
In 2024, Ireland and Germany were the fourth and fifth, respectively, largest nations having trade surplus with the US, according to the World Population Review. Trump’s higher import duties on the Eurozone would significantly impact its economic growth. During European trading hours, European Central Bank (ECB) President Christine Lagarde stated that any ensuing trade war would be a lose-lose scenario and lower Eurozone growth by at least 0.3%.
Last week, Trump also imposed 25% tariffs on imports of foreign cars and light trucks, which will come into effect on Wednesday. In response, the EU Commission warned of retaliatory measures but later agreed to provide concessions to the US to secure the partial removal of tariffs that have already hit and are expected to increase further on April 2, Bloomberg reported.
On the monetary policy front, ECB policymaker and Governor of Bank of Italy said in a speech in Rome during European trading hours that the “fight against inflation cannot be considered over” due to increased uncertainty, especially “contradictory US policy announcements”, which calls for “caution on further interest rate cuts”.
In Monday’s session, the Euro (EUR) will be influenced by preliminary German Harmonized Index of Consumer Prices (HICP) data for March, which will be published at 12:00 GMT. German HICP is estimated to rise by 2.4% year-over-year compared to the 2.6% increase seen in February. Meanwhile, six states of Germany have indicated mixed flash Consumer Price Index (CPI) data for March. Year-on-year inflation in Germany states: Saxony and Hesse accelerated, but it slowed in Baden-Wuettemberg and Bavaria. Price pressures grew steadily in Brandenburg and North Rhine-Westphalia.
On Friday, France and Spain’s March preliminary inflation data showed that price pressures rose at a slower-than-expected pace. The impact of German inflation is expected to be limited on market expectations for the ECB’s monetary policy outlook as investors anticipate a resurgence in inflation and a slowdown in economic growth in the Eurozone due to Donald Trump’s tariff agenda.
