Donald Trump’s temporary tariffs are about to become permanent, and the announcement of new tariffs could shake up markets, just as on Liberation Day in 2025. Will investors just ignore it? Let’s examine this situation and make a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- The US is preparing new long-term tariffs.
- Geopolitics is supporting the US dollar.
- The euro finds support from the ECB and macroeconomic data.
- Range-bound trading strategies remain appropriate for the EUR/USD while the pair stays within the 1.138–1.145 range.
Weekly Fundamental Forecast for Dollar
What once seemed crucial may ultimately prove insignificant, while seemingly minor developments can have far-reaching consequences. Donald Trump’s tariffs rattled financial markets in 2025, but investors have since reassessed their impact. As a result, the prospect of another round of sweeping import tariffs is no longer making the EUR/USD pair fluctuate widely.
In February, the Supreme Court struck down most of Donald Trump’s tariffs, prompting the US administration to replace them with temporary duties. Those measures, limited to 150 days, are now nearing expiration. The US administration has already unveiled a long-term tariff framework expected to cover about 99% of US trade. The temporary measures brought a period of relative stability to trade flows, but that calm is coming to an end. The key question now is whether the new tariffs will trigger another surge in volatility across the Forex market.
US Dollar Volatility Index
Source: Bloomberg.
Several factors suggest this scenario is unlikely. First, traders now have a playbook. When the tariffs were introduced in April 2025, markets initially assumed they would fuel inflation and force the Fed to raise interest rates, lifting the US dollar. However, investors soon concluded that US consumers would bear much of the tariff burden, slowing economic growth. That shift in expectations increased the likelihood of Fed easing, ultimately weakening the greenback.
Second, the new long-term tariffs are expected to be less severe than those announced on Liberation Day. A 10% tariff is set to apply to a dozen trading partners, including the EU, Mexico, and Canada, while a 12.5% tariff will apply to roughly 40 countries, including China, India, Japan, and South Korea. Although surprises remain possible, there is a strong chance the final measures will prove less disruptive than initially feared, limiting their impact on financial markets.
Investors are currently paying far more attention to geopolitical risks. The conflict involving Iran has entered its 11th day. While Washington says Tehran is seeking talks, Iranian officials deny those claims. Meanwhile, Brent crude has resumed its advance, heightening inflation concerns, pushing US Treasury yields higher, and boosting the US dollar.
10- and 30-Year Treasury Yields
Source: Bloomberg.
However, the euro is not going to give up so easily. Confidence among German investors has reached its highest level since February amid expectations that the economy will accelerate thanks to Friedrich Merz’s reforms. EUR/USD bulls are counting on hawkish rhetoric from the ECB, while the rally in stock indices is putting pressure on the US dollar as a safe-haven asset.
Weekly Trading Plan for EUR/USD
Both sides have compelling arguments, creating a balance of forces that has kept EUR/USD quotes consolidating within the 1.138–1.145 range. Only a decisive breakout beyond these boundaries is likely to determine the pair’s next directional move. Until then, range-bound trading strategies remain the preferred approach.
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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