EUR/USD: new U.S. tariffs and geopolitical risk

EUR/USD: the euro retraces after rallying, amid Fed-ECB uncertainty, new US tariffs, and geopolitical risk

The EUR/USD exchange rate is pulling back after eight consecutive bullish sessions, during which it touched the upper Bollinger Band on the daily chart. The pair is retracing below the 1.1700 level, with the daily RSI slipping toward 54, confirming a loss of momentum. From a technical perspective, the signal aligns with a consolidation after an overly extended move, but macroeconomic drivers are playing a more dominant role in shaping current market sentiment.

The first key factor remains the Federal Reserve. Following the release of the June FOMC minutes, markets interpreted a clear wait-and-see stance: interest rates remain unchanged at 4.50%, but the more dovish members are beginning to consider cuts as early as September, in light of slowing economic data. However, the Fed’s position has become more complicated due to the Trump administration’s aggressive trade policy, which has launched a fresh wave of tariffs across multiple sectors. These measures risk fueling exogenous inflationary pressures, making it difficult for the Fed to proceed with rate cuts without compromising its credibility on price stability. This environment has led to a volatile dollar, lacking a clear monetary policy direction.

At the same time, the European Central Bank has already begun a moderately accommodative path, cutting rates by 25 basis points in June (deposit rate now at 2.00%). While maintaining a dovish tone, the ECB appears ready to pause in July as it awaits further core inflation data. Recent figures show consumer prices slowing toward the 2% target, but the ECB is aware that an overly strong euro—such as seen in recent weeks—could harm the Eurozone's export competitiveness. A sharp strengthening of the exchange rate could have deflationary effects just as the ECB seeks to balance growth support and price stability.

Meanwhile, China is trying to maintain a balanced position. June export data came in positive (+5%), but the Chinese government continues to keep a tight grip on the yuan to preserve competitiveness. Markets are closely monitoring China’s growing role in global negotiations—particularly in mediating tensions between trade blocs and in supporting dedollarization efforts within the BRICS framework.

The broader picture is further complicated by persistent geopolitical risks: the war in Ukraine, the conflict in the Middle East, and latent tensions in the Pacific with Taiwan continue to trigger waves of risk-off sentiment. However, unlike in the past, the U.S. dollar is no longer the sole safe haven; uncertainty surrounding U.S. economic policy has eroded part of its "safe haven" status, making room for mixed flows into the euro, Swiss franc, gold, and cryptocurrencies.

From a technical standpoint, the EUR/USD pair currently finds support in the 1.1670–1.1685 area, while the key resistance remains between 1.1750 and 1.1770. A decisive break below 1.1650 could open the door for a deeper pullback, while a move back above 1.1770 would renew the bullish continuation scenario toward 1.18–1.20.

In summary, today’s euro movement reflects not only a normal technical correction after a prolonged rally, but also growing uncertainty over interest rates, inflation, and global stability. Investors await clarity from the ECB meeting on July 24 and the next statements from the Federal Reserve, while closely watching the looming August 1 tariff deadline and the evolution of ongoing international crises.