EUR/USD experiences a rally for the second consecutive day, achieving gains exceeding 0.69% as the US Dollar is sidelined in light of US President Trump’s threats to impose duties on European nations amid his ambitions regarding Greenland. At the time of writing, economic data in Europe and the US is not the primary focus. The shared currency is currently trading at 1.1724 as the North American session comes to a close.
EUR/USD experiences a rally of nearly 0.7% as Trump’s threats regarding tariffs on Greenland lead to widespread selling of the US Dollar. Global risk sentiment declines, pulling US equities down and increasing FX volatility. Rising Japanese bond yields and European Union retaliation strategies contribute to the decline of the Dollar.
> The Euro continues to strengthen as rising trade tensions between the US and EU bring the “Sell America” narrative back into focus: Market sentiment continues to reflect negativity as the US and Europe intensify the ongoing trade conflict that commenced last Saturday, driven by the White House’s warning of 10% tariffs on imports from eight European nations. While market experienced a subdued session on Monday because of a holiday, the reopening of the financial markets saw the S&P 500 and the Nasdaq decline by 2.1% and 2.39%, respectively. Furthermore, global bond yields are rising sharply following the announcement by Japanese Prime Minister Sanae Takaichi regarding her plans to reduce taxes on food, reminiscent of a Liz Truss scenario. The Japanese 40-year bond yield surged almost 29 basis points, reaching an unprecedented high of 4.226% on Tuesday. The data indicates that the US jobs market displayed robust figures, even though it fell short of expectations as per ADP. In Europe, inflation on the producer side in Germany has significantly decreased, moving further into deflationary territory. Meanwhile, the ZEW Survey Economic Sentiment in Germany and the European Union has indicated signs of improvement. The EU’s agenda will include a speech by Christine Lagarde, the President of the European Central Bank, succeeded by addresses from ECB members Escriva, Villeroy, Nagel, and once again, Lagarde. In the US, market participants will analyze Trump’s speech and housing data.
Latest FX Rate Trends: Geopolitical tensions weigh on the Greenback while economic data remains overlooked
- The US Dollar Index, which measures the performance of the American currency against six others, has decreased by 0.58%, currently standing at 98.56.
- The US ADP Employment Change four-week average registered at 8,000, reflecting a decrease from the previous week’s addition of 11,750 individuals to the workforce. Following the data, the probabilities for a rate cut in January remained steady according to Prime Market Terminal data. Throughout the remainder of 2026, the swaps market has factored in 45 basis points of easing.
- Over the weekend, US President Donald Trump announced new tariffs of 10% effective on February 1, targeting eight countries: Denmark, Norway, Sweden, France, Germany, Finland, the Netherlands, and the UK.
- Recently, Trump refrained from elaborating on his approach regarding Greenland. When inquired about the extent of his ambitions regarding Greenland, he responded, “you’ll find out.”
- In relation to the trade war, the European Union is said to be readying counter-tariffs amounting to €93 billion on US goods. Additionally, it is considering measures that could limit American companies’ access to the European market, indicating a strong reaction to the recent trade actions taken by Washington.
- Germany’s economic confidence experienced a notable increase, reaching its highest point since mid-2021, as the ZEW Economic Sentiment Index climbed to 59.8 in January, a rise from 45.8 in the preceding month. In January, the index for the Euro area rose from 33.7 to 40.8 points, surpassing expectations and achieving its highest level since July 20224.