The European Parliament’s trade chief said the EU plans to pause ratifying a trade deal with the US. The deal would stay on hold until the Trump administration outlines its trade policy, Bloomberg reported.
ECB President Christine Lagarde warned that changes in US trade policy could disrupt business again. She also pointed to a recent Supreme Court ruling and said any new tariffs should be announced in a way that allows firms to plan ahead.
Euro Dollar Reaction In Markets
In markets, the euro rose against the dollar. At the time of publication, EUR/USD was up 0.37% at 1.1830.
Markets have faced uncertainty since early 2025, when the European Union considered freezing ratification of the US trade deal over tariff threats. At the time, EUR/USD reacted by trading around 1.1830. That early rhetoric helped set the stage for the volatility that followed.
Now, the friction is no longer just a threat. It has helped push EUR/USD down to around 1.1150 today. Data from late last year showed German industrial production fell 0.5% in the fourth quarter, reflecting weaker exports. This softness is one of the key factors weighing on the single currency.
Against this backdrop, currency volatility has risen sharply. Implied volatility on one-month EUR/USD options has climbed from about 7% late last year to above 9.5% in recent sessions. This suggests traders may look at strategies that benefit from large price moves—such as buying straddles or strangles—rather than relying only on directional trades.
Challenges For ECB Policy Path
This situation also creates a policy challenge. January Eurozone inflation remains elevated at 2.4%, which complicates the European Central Bank’s next steps. The ECB is reluctant to cut rates to support growth while inflation is still above target. In interest rate swaps, traders may want to position for the ECB to stay on hold longer than previously expected.
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