EUR/USD climbed to 1.1725 after Donald Trump threatened tariffs, which weakened the US Dollar. The pair rose nearly 0.7% as Trump’s interest in Greenland and proposed duties on European countries led to a bigger sell-off of the Dollar. The EUR/USD closed at 1.1724, with a rise of more than 0.69% for the second consecutive day. Trade tensions increased when the White House announced 10% tariffs on imports from eight European nations, causing the S&P 500 and Nasdaq to drop by 2.1% and 2.39%, respectively.

Global Bond Yields And Economic Data

Global bond yields jumped, boosted by tax cuts announced in Japan. Japanese 40-year bond yields rose almost 29 basis points to an all-time high. Although US job data was strong, it didn’t meet expectations, and European inflation data showed deeper deflation, although German economic sentiment showed some recovery. Other important events include speeches from Christine Lagarde of the ECB and releases of US housing data. The US Dollar Index fell 0.58% to 98.56. New tariffs announced for February 1 on European countries could lead the EU to consider retaliatory tariffs worth €93 billion. Technical analysis indicates that EUR/USD could see more gains, with recent highs at 1.1763 and resistance levels at 1.1750 and 1.1800. If the price falls below the 20-day SMA at 1.1697, we could see lower targets.

Retaliatory Measures And Market Volatility

At the end of 2025, the US Dollar faced a big hit due to tariff threats against several European countries. This political move created a risk-off sentiment, pushing the EUR/USD pair toward 1.1725. The market reacted with higher foreign exchange volatility and a drop in US stocks. The situation has stayed tense as Brussels officially submitted a €95 billion counter-tariff list to the World Trade Organization last week. This formal action reveals the EU’s intention to retaliate, putting pressure on the Dollar and strengthening the Euro. With new US tariffs set for February 1, the next two weeks are crucial. This ongoing uncertainty suggests that volatility will continue. The Cboe EuroCurrency Volatility Index (EVZ), which measures expected swings for the Euro, climbed to a 12-month high of 9.8 in late 2025 and remains above 8.5 today. Traders might consider buying options, like straddles, to benefit from big price changes in either direction as news continues to affect the market. These trade disputes are also impacting central bank expectations for the coming months. The CME FedWatch Tool now indicates a 65% chance of a 25-basis-point rate cut by the Federal Reserve in March, up from 40% a month earlier. This increasing expectation for more lenient US monetary policy could further pressure the Dollar. Currently, the EUR/USD is consolidating around the 1.1700 level, just above the key moving average tested late last year. Buying call options with a strike price of 1.1750 presents a good opportunity for potential gains if the pair rises. On the other hand, put options below 1.1650 could offer a safety net against a sudden downturn if trade negotiations improve. Create your live VT Markets account and start trading now.

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