Key moments

• The EUR/USD fell 0.10% on Wednesday, reaching 1.0781.
• The U.S. Dollar Index has been trading above 104.150.
• Market participants are wary of the direction of the U.S. dollar as the implementation of U.S. tariffs on imported goods approaches.

EUR/USD Experiences Mild Fluctuations Ahead of US Tariff Announcement

The euro experienced a decline against the U.S. dollar on Wednesday, with the EUR/USD falling below the 1.0800 threshold. The pair declined 0.10% before rebounding to neutral figures as market participants navigated a landscape fraught with uncertainty. In addition, the U.S. Dollar Index maintained its position above 104.150.

Wednesday saw the EUR/USD stay within the 1.0780 to 1.0800 range as traders braced for the implementation of the Trump Administration’s new tariffs, a move expected to significantly influence global trade relationships. The anticipation of these levies created an atmosphere of caution, leading to fluctuations in currency valuations.

Economic indicators from the Eurozone also played a role in market sentiment surrounding the EUR/USD pair, and they painted a picture of moderating inflation. The Harmonized Index of Consumer Prices for March indicated an increase of 2.2% year-over-year. This aligned with market predictions and suggested a slight cooling from February’s 2.3% rate. This development strengthens the argument for a potential interest rate cut by the European Central Bank in April, potentially adding downward pressure on the euro.

Conversely, the dollar’s trajectory remained contingent upon upcoming economic releases, particularly those relating to U.S. labor and manufacturing. Reports concerning ADP employment changes and ISM manufacturing purchasing managers’ index data were closely watched, as strong results could potentially strengthen the dollar’s position. Furthermore, the market focused on the forthcoming Non-Farm Payroll figures for March, scheduled for release on Friday.

The Federal Reserve’s stance on interest rates added another layer of complexity. The CME FedWatch tool indicated a high probability of the Fed maintaining rates in May. The chances of the rates being lowered in June have increased substantially, however, reaching 83.5%.