EUR/USD remains offered as the weekend announcement over steel tariffs was the first to hit the EU. Europe is now bracing for other sectors, such as autos, to be tariffed. There is little justification for the EU bloc as a whole to be hit with reciprocal tariffs since the EU tariff regime is relatively low. But, presumably, European politicians are more fearful about broader tariffs in April once the US Commerce Department delivers its report on why the US runs large trade deficits.
Whatever today's news on tariffs, wide rate spreads justify EUR/USD continuing to trade near 1.03 and undermine the need for any corrective bounce. As our rate strategy colleagues discuss here, the decoupling of the eurozone from US rate spreads can see differentials stay wide, if not move wider over the coming months. Combined with rising natural gas prices, expect EUR/USD to stay offered. A decline towards the 1.0250/60 range, or potentially lower, seems probable ahead of the new tariffs.
Even though EUR/USD is range-bound, we are starting to see some decent moves lower in EUR/SEK and EUR/NOK. In EUR/SEK, two-year swap differentials have moved in favour of the krona as the ECB is priced for another 88bp of easing this year, while the Riksbank is barely expected to cut once. But the story seems larger than rate differentials, and like its CEE peers (see below), the krona is shaking off the rise in gas prices. This resilience may be driven by growing optimism about a potential ceasefire deal in Ukraine. Expectations are that the US will reveal more of its plans at a Munich security conference this weekend – although any breakthrough with Russia would be a major surprise and is not priced in FX markets.
Whatever today's news on tariffs, wide rate spreads justify EUR/USD continuing to trade near 1.03 and undermine the need for any corrective bounce. As our rate strategy colleagues discuss here, the decoupling of the eurozone from US rate spreads can see differentials stay wide, if not move wider over the coming months. Combined with rising natural gas prices, expect EUR/USD to stay offered. A decline towards the 1.0250/60 range, or potentially lower, seems probable ahead of the new tariffs.
Even though EUR/USD is range-bound, we are starting to see some decent moves lower in EUR/SEK and EUR/NOK. In EUR/SEK, two-year swap differentials have moved in favour of the krona as the ECB is priced for another 88bp of easing this year, while the Riksbank is barely expected to cut once. But the story seems larger than rate differentials, and like its CEE peers (see below), the krona is shaking off the rise in gas prices. This resilience may be driven by growing optimism about a potential ceasefire deal in Ukraine. Expectations are that the US will reveal more of its plans at a Munich security conference this weekend – although any breakthrough with Russia would be a major surprise and is not priced in FX markets.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
1. AccuTrade System:
tradingview.com/v/yDFPnb1J/
2. Signal Performance:
thedailyfx.com/performance/
3. Best Forex EA:
thedailyfx.com/beetle-ea/
4. Free Forex VPS:
myfxvps.com/get-it-free/
tradingview.com/v/yDFPnb1J/
2. Signal Performance:
thedailyfx.com/performance/
3. Best Forex EA:
thedailyfx.com/beetle-ea/
4. Free Forex VPS:
myfxvps.com/get-it-free/
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.