The EUR/USD pair saw a significant decline on Thursday, losing almost 0.9% and slipping back below the 1.0400 mark for the first time in nearly two weeks. This pullback reflects a weakening technical outlook for the Euro, compounded by fresh concerns over U.S. tariffs on European goods.
Tariff Fears Resurface
U.S. President Donald Trump reignited fears of tariff escalation on Thursday, shifting timelines once again regarding tariffs on key trade partners. Although initially expected in April, Trump confirmed that tariffs on Canada and Mexico would proceed as planned on March 4.
In addition to these measures, Trump took the opportunity to criticize Europe’s trade practices, accusing the EU of treating the U.S. “very badly” on trade. This may be referencing his administration’s view that European VAT taxes effectively act as tariffs on U.S. products. As a result, further tariffs targeting the EU are expected to take effect in early April, deepening concerns over trade tensions and their impact on the Euro.
U.S. Economic Data Suggests Rising Inflation
On the economic front, U.S. data pointed to stronger-than-expected growth, fueling concerns of rising inflation. The U.S. Gross Domestic Product (GDP) for Q4 grew by 2.4% on a quarter-over-quarter basis, surpassing the forecast of 2.2%. The annualized GDP remained stable at 2.3%.
Meanwhile, U.S. Durable Goods Orders saw a 3.1% month-on-month rise in January, beating the expected 2.0%. However, much of this surge is attributed to businesses preparing for potential tariffs, which could artificially inflate the data. Excluding transportation-related items like Boeing orders and automotive vehicles, the increase in orders was flat, missing expectations of a 0.3% gain.
The Core Personal Consumption Expenditures (PCE) Price Index, a key inflation indicator, also came in higher than expected, rising 2.7% for the quarter, up from the anticipated 2.5%. This suggests persistent inflationary pressures that could challenge investors hoping for a temporary spike in inflation.
EUR/USD Technical Outlook
Thursday’s downward movement has placed EUR/USD below its 50-day Exponential Moving Average (EMA) of 1.0444, reinforcing a bearish outlook for the pair. The price action now signals further downside potential, with a target near the 1.0300 level as the next key support zone.
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