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EURUSD:
The EUR/USD exchange rate experienced a modest uptick on Tuesday, breaking a two-day losing streak and achieving last-minute gains before the Trump administration’s wide-ranging ‘retaliatory’ tariffs are scheduled to take effect on 9 April. Speeches from key Fed policymakers have begun to clash with growing market expectations for Fed rate cuts before the end of 2025, placing markets on a collision course with the negative consequences of far-reaching tariffs.
Overall, this week’s European economic data calendar is not overly busy, with Tuesday providing a respite from the usual barrage of geopolitical and trade news that has characterised the final weeks of the Trump administration. However, several important Federal Reserve (Fed) officials have highlighted that uncertainty and the negative inflationary impact of US tariffs will make it harder, not easier, for the Fed to cut rates.
Despite this, traders are increasingly speculating that the Fed will be compelled to initiate a rate-cutting cycle before the end of the year, as negative economic consequences from the same tariffs could potentially trigger a U.S. recession. Data from the CME’s FedWatch tool shows that swap traders are beginning to speculate that a quarter-point rate cut could come as early as May. However, most rate market participants still see a 25 basis point rate cut in July as more likely, expecting a total cut of 100 basis points or more by the end of the year.
Consumer Price Index (CPI) data is scheduled for release on Thursday, followed by Producer Price Index (PPI) and University of Michigan (UoM) Consumer Sentiment Index on Friday. This will be the final set of significant US inflation and sentiment data for the ‘pre-tariff’ period of 2025, which will be crucial benchmarks for the rest of the year.
Trading recommendation: BUY 1.1080, SL 1.1000, TP 1.1120
Origin: FreshForex
