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EUR/USD reached approximately 1.0820 during North American trading on Wednesday, supported by a decline in the US Dollar ahead of President Trump’s tariff announcement. The US Dollar Index (DXY) fell to around 104.00.
The announcement of tariffs is anticipated to negatively impact the US economy, with the ISM Manufacturing PMI showing contraction in March. Business activity has deteriorated, leading to decreased demand and company reductions.
Trump’s tariffs may disrupt global trade, making imported goods less competitive and slowing down global business investment. US Treasury Secretary Scott Bessent indicated that the tariffs will be the highest imposed, with potential for targeted countries to negotiate relief.
Tariff Impacts And Market Reaction
ADP Employment Change data for March showed a rise of 155,000 jobs, exceeding the predicted 105,000. The Canadian Dollar saw the strongest exchange rate against the US Dollar today.
Despite expectations that the EU may incur higher tariffs, EUR/USD continues to rise. Hefty tariffs could adversely affect the Eurozone’s economic prospects, with estimates suggesting a potential 0.5% reduction in growth.
Eurostat reported slower growth in the core HICP at 2.4%, below expectations. ECB President Christine Lagarde expressed optimism about managing inflation, though further measures may be needed.
European Response And Inflation Outlook
The situation could deteriorate if the EU responds with countermeasures. European Commission President Ursula von der Leyen stated that potential responses are being considered to address US tariffs.
EUR/USD remains within Tuesday’s range at around 1.0800, with support from the 20-day EMA at 1.0778. The December 6 high at 1.0630 serves as a key support level, while 1.1000 is identified as a resistance point.
Trump plans to unveil extensive tariffs termed “Liberation Day,” which could greatly influence global trade dynamics.
We’ve seen EUR/USD edge up to around 1.0820, reacting to pressure on the US Dollar as anticipation builds before Trump’s full unveiling of the new tariff schedule. This movement followed a downshift in the DXY, which now hovers near 104.00. It’s not surprising — traders tend to exit Dollar positions when there’s policy uncertainty or risk of backlash abroad.
The broader tone from the US economy isn’t helping the greenback’s case either. The ISM Manufacturing PMI has dipped yet again into contraction, reflecting reduced orders and suppressed output. This points to weaker supply chain momentum and leaner inventories, which ultimately means shrinking demand. Employers slashing costs and pulling back on hiring or hours would be the next logical step — not just a hypothesis, given what we’re seeing.
Now, with these new tariffs looming, it’s not just the US that faces slowdown potential. Bessent confirmed these are likely to be the highest-level charges in decades. When duties of that magnitude are imposed, those targeted will almost certainly draft proportional replies. And if tit-for-tat escalates, the knock-on effect is longer-term uncertainty and hesitation, especially in manufacturing-heavy economies. Markets don’t like slowdown cycles that begin this way — not when they’re initiated by government action rather than supply or demand shifts.
It’s worth noting March ADP employment data surprised to the upside — 155,000 new jobs added versus a consensus of 105,000 — another source of confusion for short-term traders. Yet that number doesn’t change the medium-term picture. Much of the job gain could have emerged in lower-wage or temporary sectors, which won’t significantly shift consumer spending strategies or business confidence. And when divergent indicators like employment and industrial output move in opposite directions, we simply look for signs of lagging impact that hasn’t filtered through yet.
On the other side of the Atlantic, although the Eurozone is widely expected to bear fallout from US trade restrictions, the euro hasn’t conceded ground so far. Unusual? Not really — weaker North American sentiment typically props up major crosses like EUR/USD in the short term. However, Eurostat’s recent disclosure that core HICP cooled to 2.4%, beneath forecasts, is more telling. The ECB finds itself balancing between already strained consumer pricing and the need to remain vigilant in the face of foreign demand shocks.
Lagarde said as much, when she signalled the ECB may need to adjust depending on how external pressures unfold. Markets have taken this with measured confidence, though not full conviction. And if import tariffs largely pass through to retail prices in the EU, inflation estimates could swing above current paths again, forcing monetary tightening previously taken off the table.
Over in Brussels, von der Leyen confirmed that strategic counteractions are already under discussion. If retaliatory duties are rolled out from the EU side, it expands this from isolated action to broader trade deceleration. That, again, feeds into growth forecasts. Internal projections point to a 0.5% expected drag if the trade escalation continues unchecked, particularly in manufacturing-heavy economies like Germany. That number’s not theoretical — we already saw similar impacts around 2018’s trade tensions, suggesting past patterns may repeat under more forceful policies.
Price-wise, EUR/USD continues to hold just below intermediate resistance levels. Despite yesterday’s gains, we’re still confined within Tuesday’s established range. Support remains nearby at the 20-day EMA of 1.0778, and technical buyers may re-enter if it recoils there again. If current conditions steepen, a slide toward the previous December floor of 1.0630 could test overall risk appetite. On the flip side, reclaiming 1.1000 would indicate broader Dollar weakness prevailing further.
As “Liberation Day” tariffs edge closer to being declared, it pays to stay responsive to cross-asset flow shifts. We’re currently focused on rate differentials, policy tone, and emerging retaliatory measures that may gain clarity over the coming days. Any surprise elements in tariff scope or exemptions will shape where risk flows next.
