EUR/USD Slides as US Dollar Rebounds on Tariff Pause Hopes, Market Watches Trump’s Next Move

The EUR/USD currency pair weakened on Monday as the US Dollar regained strength, driven by speculation that President Donald Trump may pause the execution of new tariffs for 90 days—excluding China. The pause, signaled by US National Economic Council Director Kevin Hassett, helped the Dollar Index (DXY) climb toward 103.20, reversing earlier losses and dragging the Euro lower.

Although the White House has yet to officially confirm the 90-day pause, markets responded swiftly to the news, interpreting it as a potential window for de-escalation. The EUR/USD pair, which had dropped to a low near 1.0880 earlier in the day, managed to recover to 1.0940 during North American trading. Still, it remained down approximately 0.25% at the time of writing.

A temporary easing in protectionist trade measures would offer US allies a chance to negotiate and potentially avoid heightened tariffs. Yet the exemption of China suggests that Washington is doubling down on its trade war rhetoric with Beijing.

Despite the short-term optimism, concerns remain. Analysts at JP Morgan now forecast a 0.3% contraction in the US economy for 2025, citing the impact of full-scale Trump tariffs. The investment bank warned that the economic outlook has deteriorated due to increased import costs and uncertainty weighing on business investment and consumer sentiment.

Fed Chair Jerome Powell echoed these concerns on Friday, highlighting the inflationary risks associated with the new tariff regime. However, he maintained that the current interest rate range of 4.25%-4.50% remains appropriate for now, saying it is “too soon” to determine the direction of future monetary policy.

Over the weekend, Trump appeared unconcerned by global market volatility, telling reporters, “Sometimes you have to take medicine to fix something,” referencing the short-term pain in global equities. Despite market selloffs, Trump argued that tariffs would generate billions annually and urged the Federal Reserve to begin cutting interest rates, noting falling oil and food prices.

Meanwhile, the Euro is facing its own challenges. European Central Bank (ECB) Executive Board member Isabel Schnabel warned that Trump’s renewed tariffs could create “a dramatic surge in uncertainty” for the Eurozone, worsening its already fragile economic landscape. The ECB has already slashed interest rates twice this year and is expected to cut again on April 17, pushing the deposit facility rate toward 2.25%.

Additionally, Eurostat reported disappointing retail sales figures, which grew only 0.3% in February—below expectations of 0.5%. This further dampened investor sentiment toward the Euro.

Still, technical analysis shows EUR/USD holding above its 10-day Exponential Moving Average (EMA) near 1.0886. The 14-day Relative Strength Index (RSI) remains above 60, suggesting bullish momentum is still present. Resistance lies at the September 25 high of 1.1214, while support is seen near 1.0850.

As US-EU trade negotiations pick up, EU leaders like Von der Leyen and Maros Sefcovic have signaled willingness to cooperate, offering zero-for-zero tariff deals on cars and industrial goods. The coming weeks will be crucial in determining if diplomacy can outweigh confrontation in this evolving global trade narrative.