The EUR/USD currency pair experienced a significant decline of 0.85% on Thursday, dipping below the 1.0400 level for the first time in nearly two weeks. This downward trend was influenced by heightened concerns over US tariff threats and disappointing economic data from the United States, which pointed to a potential slowdown and increasing inflationary pressures.
US President Donald Trump reignited market fears by altering his timeline for implementing tariffs on imports from major trading partners, including Canada and Mexico, with plans to start these tariffs next week. This abrupt shift in messaging came after he had initially suggested that tariffs could begin in April. Focus on European trade relations intensified as Trump criticized what he viewed as unfair treatment of American goods by European countries, hinting at additional tariffs specifically targeting the EU.
In parallel, US economic indicators added to the sense of unease. The GDP growth for the fourth quarter reached 2.4%, surpassing the anticipated 2.2%. However, the increase in durable goods orders presented a mixed picture. January saw a rise of 3.1% month-over-month, significantly above the expected 2.0%. Yet, much of this uptick can be attributed to businesses preemptively stocking up in anticipation of tariffs, raising questions about the sustainability of this growth amidst looming inflation concerns. Notably, when excluding volatile sectors like transportation, durable goods orders were flat, falling short of expectations.
Investors are also bracing for upcoming inflation data, expected to reveal core Personal Consumption Expenditures (PCE) index figures. Preliminary forecasts indicate a rise to 2.7%, higher than the previously estimated 2.5%. This scenario contributes to a bearish outlook for the EURO against the dollar, suggesting that the current market dynamics may push the EUR/USD towards further declines, targeting the significant support level around the 1.0300 level. As price momentum shifts decidedly negative, traders should remain vigilant for continuing volatility in the currency pair.
