- EUR/USD trades flat at 1.0830 on Monday after briefly breaking below 1.08 last week.
- Preliminary PMI data for March from Germany, France and the overall Eurozone comes in mixed.
- Markets are having a sigh of relief with possible softening for reciprocal tariffs according to US officials.
The EUR/USD is turning flat on the day near 1.0830 at the time of writing on Monday, amidst headlines from US officials that the upcoming reciprocal tariffs will be targeted for certain products and sectors. Overall, the pair is expected to stay above 1.08 for now after United States (US) officials commented on Monday that the upcoming reciprocal tariffs will rather be targeted by sector and country, not at all simply broad-based as US President Donald Trump had originally announced.
Meanwhile, on the economic data front, the preliminary Purchasing Managers Index (PMI) for March is being released on Monday. In the old continent, S&P Global and Hamburg Commercial Bank (HCOB) PMIs have been upbeat in France, beating estimates and February’s readings in both the manufacturing and services sectors, but they still signal contraction. Meanwhile, results for Germany and the overall Eurozone have been mixed. The focus now shifts to the US S&P Global PMI data at 13:45 GMT.
Daily digest market movers: US PMI to compare
- European PMI data has already been released:
- For France, upbeat numbers with the Services component coming in at 46.6, beating the 46.3 expected and the previous reading of 45.3. The Manufacturing sector component jumped to 48.9, coming from 45.8 in February and beating the 46.2 expected.
- In Germany, the Services sector reading fell to 50.2, missing the 51.4 estimate and below the previous 51.1. The Manufacturing component popped to 48.3, beating the previous 46.5 and above the consensus of 47.7.
- In the overall Eurozone, Services PMI decreased to 50.4 from 50.6 previously, falling below the 51.0 expected. However, the Manufacturing reading accelerated to 48.7 from 47.6 in February, beating the 48.0 expected.
- The Chicago Fed National Activity Index for February came in as a surprise 0.18, beating the previous -0.03 which got revised even to -0.08.
- At 13:45, the US preliminary PMI data for March is due by S&P Global. The Services PMI is expected to marginally tick up to 51.2, coming from 51.0. Manufacturing reading is expected to decline to 51.9 from 52.7.
- At 19:10 GMT, Vice Chair for Supervision of the Board of Governors of the Federal Reserve System Michael Barr will speak in a moderated discussion on small business lending at an event hosted at Advancing Innovation and Fairness in Small Business Finance, Washington, D.C.
- Equities are rallying on Monday after the news that the upcoming reciprocal tariffs might be less severe than initially announced. In Europe, all indices are up near 0.5%, while US futures see the Nasdaq lead over 1% ahead of the opening bell.
- The CME Fedwatch Tool projects a 85.1% chance for the Federal Reserve (Fed) to keep interest rates unchanged in the May meeting while there is a slim 14.9% chance for a rate cut.
- The US 10-year yield trades around 4.289% and is looking for direction after the steep correction from last week.
Technical Analysis: Caught between two barriers
The EUR/USD pair is stuck in a very tight range on the weekly chart. The fact that EUR/USD closed below the 200-week Simple Moving Average (SMA) at 1.0854 last week means that a return to 1.10 is not in the cards immediately. On the other hand, the support from the 100-week SMA at 1.0782 and the 55-week SMA at 1.0740 reveal that a turnaround to 1.05 is not set to materialize quickly either.
On the upside, 1.1000 is the key level to look out for. Once that level is breached, the pair enters the famous 1.1000-1.1500 range, where it often tends to stay for quite some time. First, of course, the 200-week SMA at 1.0854 needs to be reclaimed.
On the downside, the support from the 100-week SMA at 1.0782 and the 55-week SMA at 1.0740 should be enough to support any selling pressure EUR/USD might face. In case it does not hold, 1.0667 and 1.06 are the next targets to the downside.
EUR/USD: Weekly Chart
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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