Following his inauguration, Donald Trump has made a lot of pledges, but a month later, investors and consumers are expressing disappointment with his policies. How will this affect the EURUSD pair? Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The US may extend the delay in tariffs against Mexico and Canada.
- The White House is considering 25% duties against the EU.
- A trade war between Washington and Beijing will be much more devastating than expected.
- Short trades on the EURUSD pair can be opened if the price slumps below 1.045.
Weekly US Dollar Fundamental Forecast
Donald Trump’s contradictory statements have created a sense of uncertainty, causing the EURUSD pair to fluctuate significantly. Initially, Trump indicated that tariffs against Mexico and Canada would be effective from April 4, not March 4. This statement should have supported the euro. However, the White House subsequently announced 25% import duties against the European Union, leading to a decline in the major currency pair.
US Goods Imports
Source: Bloomberg.
American consumers, who initially showed great enthusiasm for Donald Trump’s campaign promises, have since calmed down and faced the reality. For example, they expected him to start reducing inflation from the day he took office. Consumer confidence collapsed even amid a still-strong economy. This contradiction of objective reality will unlikely bother Donald Trump, just as it did not torment his predecessor. However, the decline in stock indices, which the White House considers a measure of its performance, may encourage the US president to adopt a more conciliatory stance on tariffs.
According to a US administration official, Donald Trump has not yet decided on the date to impose 25% import duties on Mexico and Canada, whether on March 4 or April 4. The proposed levies with the EU are new, but the White House is considering options for both universal tariffs and tariffs on individual goods and sectors.
This ambiguity in Trump’s statements has prompted a consolidation in the EURUSD rate within the 1.045–1.05 range, significantly impacting the Canadian dollar and Mexican peso. The market’s apparent skepticism regarding the White House’s commitment to protectionism poses a substantial threat to the euro.
Mexican Peso and Canadian Dollar Rates
Source: Bloomberg.
The 10% tariffs against China remain in place, and their consequences risk being far more damaging to the US than anticipated. According to US data, China’s share of imports fell from 21.6% in 2018 to 13.4% in 2024, a decrease of $66 billion to $439 billion in nominal terms. However, Beijing’s statistics reflect a different picture. While specific Chinese exports to the US decreased by 2.5 percentage points, the total exports rose by $91.2 billion to $524 billion. This discrepancy can be attributed to the exemption of parcels up to $800 from fees, as per Washington’s decision.
The ongoing trade tensions with China are likely to fuel inflation, potentially leading to further economic challenges for the United States. This is particularly concerning given the Federal Reserve’s need to maintain high interest rates in response to the accelerating prices. According to Atlanta Fed President Raphael Bostic, the central bank needs to maintain its current stance. As a result, borrowing costs will be decreased promptly, which may hurt the US dollar.
Weekly EURUSD Trading Plan
Meanwhile, one may consider short positions on the EURUSD pair if the quotes break through the support level of 1.045.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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