Created on April 02, 2025

• The euro has initially tried to rally a bit during the trading session on Tuesday, only to turn around and show signs of negativity.
• That being said, we felt rather drastically, only to see a weaker than expected Manufacturing PMI number in the United States suggesting that perhaps the US economy is starting to slow down a bit.
• If that is going to be the case, then it makes quite a bit of sense that we would see traders bet on the idea that the Federal Reserve might have to get a little bit looser with monetary policy.
• Whether or not that’s actually true remains to be seen, but it is the thought process that a lot of people are contemplating.

Uptrend Still Here

The euro is still technically in an uptrend, as we launched straight up in the air a few weeks ago, and despite the fact that we have been somewhat quiet recently, the reality is that we have pulled back just a bit, but we have also seen quite stable trading, that’s actually a good sign for the uptrend to continue given enough time, so we will have to wait and see how that plays out. Ultimately, this is a situation where we will have to pay close attention to whether or not momentum picks up, because the momentum is the one thing that will really get this thing going. As things stand right now, there just isn’t a lot going on, although risk is most certainly skewed to the upside.

A short-term pullback at this point in time could send this market looking to the 200 Day EMA, just below the 1.07 level. If we were to pull back to that area, technical traders would more likely than not look at the 200 Day EMA in order to try to find some type of technical support. Whether or not it would get it remains to be seen, but I recognize that it’s more likely than not that we would find buyers jumping in between here and there.

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• The GBP/USD forecast is mixed amid tariff uncertainty. 
• Volatility may spike as tariffs could be imposed relentlessly. 
• Easing UK wage growth boosts BoE’s dovish stance. 

The GBP/USD forecast remains elevated as the US dollar stays weak on Wednesday. The pair wobbled around 1.2950 during the New York session. The heat from reciprocal tariffs continues to affect the US dollar. The DXY has dropped to 104.00, reflecting the market jitters.

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Trump’s policies continue to stir sentiment, with April 02 named “Liberation Day” for the US economy. According to a White House representative, the fresh levies will take effect immediately after the announcement. Market participants suggest a tariff of up to 20% on most American imports.

US Treasury Secretary Scott Bessent stresses that the administration aims to impose the maximum tariffs on major trading allies. However, countries willing to ease non-trade barriers may receive concessions. Risk aversion is expected to surge on the day. Moreover, Trump has proposed redistributing tariffs to US households through refunds or tax dividends that could fuel inflationary pressure. Hence, the Fed may retain its restrictive stance for an extended period.

The ADP report was upbeat. A whopping 155k jobs were added in March, against an expected 105k, while the previous reading was 84k. This signals a resilient US labor market, reinforcing a delayed rate cut.

The pound trades cautiously ahead of Trump’s tariff announcement. Concerns over global trade disruptions and a potential slowdown in economic growth have dampened investor sentiment.

The UK economy is particularly vulnerable, with the Office for Business Responsibility (OBR) warning that Trump’s policies could deplete the UK government’s fiscal buffer and shrink the economy by up to 1%.

Additionally, delays in finalizing a UK-US economic deal beyond the so-called “Liberation Day” have created further uncertainty. There is speculation that the terms of the agreement could be revised post-announcement, adding to investor apprehension.

On the domestic front, easing wage growth in the UK adds to dovish expectations for the Bank of England (BoE). The Incomes Data Research (IDR) reported that median pay growth slowed to 3.5% in the three months to February, the lowest in three years.

This suggests employers are holding back on wage hikes in response to higher National Insurance (NI) contributions introduced in the Autumn Statement by Chancellor of the Exchequer Rachel Reeves.

GBP/USD Technical Forecast: No clear bias

The 4-hour chart for the GBP/USD shows a perplexing scenario. The prices remain locked in a tight range under 1.2950. The volume bars are positive for the buyers.

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However, the recent bearish candle also had a high volume. This indicates that the market is volatile but indecisive. The key level on the upside remains 1.3000, which may cap the gains, while 1.2900 is tough support to break.

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Created on April 02, 2025

• Fears of the repercussions of US tariffs on major trading partners continue to dominate Forex markets and all financial markets.
• In the case of the EUR/USD pair, it declined to the support level of 1.0777 before stabilizing around 1.0788 at the time of writing.
• As we predicted earlier, the stability of the EUR/USD below the 1.08 support level will increase selling pressure on the EUR/USD.

Euro Price Negatively Affected by Tariff Concerns

According to forex market trading, selling pressure on the EUR/USD has increased following reports that the US administration is proposing to impose tariffs of approximately 20% on most US imports, although a final decision has not yet been made. Investors are eagerly awaiting further details on President Trump’s reciprocal tariffs, which are set to take effect today, April 2, following last month’s imposition of tariffs on aluminium, steel, and automobiles, and increased tariffs on all Chinese goods.

Inflation Rates and the Future of ECB Policies

On another market-influencing front, economic data revealed that consumer price inflation in the Eurozone fell to 2.2% in March, the lowest since November 2024, driven primarily by a slowdown in services price growth. Core inflation fell more than expected to 2.4%, the lowest reading since January 2022. With slowing inflationary pressures and rising global trade tensions, expectations have grown that the European Central Bank (ECB) may cut interest rates by 65 basis points this year.

According to currency market trading, the euro rose 3% last month, supported by broad weakness in the US dollar amid a shift in US tariff policies and Germany’s approval of a major fiscal package.

Trading Tips:

The EUR/USD will remain in its downward trajectory until the reaction to US jobs data and the future of the global economic recovery after the US tariffs are implemented.

The European Central Bank is scheduled to issue its next interest rate decision on April 17, and market expectations now indicate a 72% probability of a rate cut. By then, the size of the upcoming US tariffs will become clear, as will any inevitable adjustments the White House will make.

European stocks rise ahead of a major event

During yesterday’s trading, European stock market indices rose. According to trading, the STOXX 50 and STOXX 600 indices rose by more than 1%, recovering from a four-session losing streak. This comes after the indices fell by about 1.5% the previous day to reach their lowest levels in two months, as investors prepare for the new tariffs imposed by President Trump, which are scheduled to take effect on Wednesday.

Overall, the scope of these tariffs remains unclear, with reports indicating a 20% tax on most US imports. Meanwhile, eurozone inflation slowed to 2.2% in March, in line with expectations. In corporate news, Thyssenkrupp shares rose more than 7% after analysts at Kepler Cheuvreux raised their rating to “buy,” citing increased steel and defence spending in Germany.

EUR/USD Technical Analysis Today:

According to daily chart trading, the bears’ control over the EUR/USD pair has been confirmed by stabilizing below the 1.0800 support level, paving the way for a stronger downward move. The nearest support levels for the EUR/USD today are 1.0720 and 1.0600, respectively. From the last level, technical indicators will move towards strong oversold levels. Conversely, on the same timeframe, a real reversal of the general trend to upward will not occur without moving towards and above the psychological resistance of 1.1000 again. The performance of the EUR/USD will remain subject to signals from global central bank officials, the reaction to US tariffs, and investor risk appetite, as well as the reaction to US jobs data.

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