In recent trading sessions, the Euro (EUR) has surged over 1% against the US Dollar (USD), currently positioned at 1.1730. This movement coincides with a notable downturn in the dollar, driven by heightened tensions stemming from US President Donald Trump’s threats of imposing additional tariffs on European nations. These developments have sparked a “sell America” sentiment reminiscent of market behavior observed during the “Liberation Day” in April.
As Trump marks the first anniversary of his second term, he reaffirmed his commitment to implementing a 10% tariff on European countries that oppose his controversial proposal to annex Greenland. This has prompted Eurozone leaders to convene in Brussels, where discussions are underway regarding potential retaliatory measures in what is rapidly evolving into an unprecedented trade war among Western allies.
On the economic front, the German Producer Prices Index has exhibited further deflation, contracting by 0.2% in December, which surpassed the anticipated decline of 0.1%. Year-on-year, producer prices fell at a rate of 2.5%, a drop from 2.3% in November and above the expected 2.4%. The Euro’s rise against the Dollar has continued in light of this data release.
As US markets reopen after the Martin Luther King Jr. holiday, the economic calendar appears sparse, with the notable exception of the ADP weekly report on private-sector employment. Analysts are particularly focused on Trump’s upcoming speech at the Davos forum scheduled for Wednesday.
Recent figures relating to the Euro’s performance reveal that it has shown particular strength against several major currencies, with the Japanese Yen being one of the hardest hit in comparative losses.
Denmark’s Minister of Economy, Stephanie Lose, expressed on Monday the country’s intent to maintain dialogue with the US. However, she warned that if tensions escalate further, Europe would need to prepare for a coordinated response.
The anticipated German ZEW Economic Sentiment Index, due for release on Tuesday, is expected to show improved institutional investor sentiment, potentially reaching 50 in January—the highest reading since July. This follows the final Eurozone Harmonised Index of Consumer Prices (HICP) revision, down to a growth rate of 1.9% year-on-year in December, coupled with a steady core HICP growth at 2.3%.
From a technical standpoint, the EUR/USD pair is trading robustly above 1.1730, with market indicators suggesting momentum could target the 1.1740 resistance level, ahead of earlier highs from January. Although current conditions appear overstretched with an overbought RSI, the Moving Average Convergence Divergence (MACD) points to continued upward momentum.
In summary, as the Euro appreciates in value amid geopolitical and economic uncertainties, market participants remain on high alert for upcoming decisive developments, particularly from US leadership, that could further influence currency valuations. The intricate interplay between economic data releases and political announcements will be pivotal in shaping the trajectory of the Euro in the coming days.
