EUR/USD rose on Wednesday as the US Dollar lost strength. The pair traded near 1.1805 after hitting a daily low around 1.1771. The move followed new trade tension tied to US tariff action.
President Donald Trump announced a 10% global tariff after the US Supreme Court ruled last week against his use of the International Emergency Economic Powers Act (IEEPA). The tariff started on Tuesday under Section 122 of the Trade Act of 1974. The White House said it is preparing a formal order to raise the rate to 15%.
Trade Tensions And Policy Signals
The European Parliament has paused the ratification of the US-EU trade deal agreed last year. At the same time, the US Dollar got some support as markets cut bets on near-term Federal Reserve rate cuts, with inflation still judged against the 2% target.
In the Eurozone, final figures showed HICP inflation at 1.7% year on year in January. That is down from 2.0% in December and the lowest level in 16 months. Core inflation eased to 2.2% from 2.3%, and markets now expect ECB rates to stay unchanged through 2026.
Eurozone Consumer Confidence and the Economic Sentiment Indicator are due on Thursday. US PPI data is due on Friday.
The rebound in EUR/USD toward 1.1800 gives a mixed outlook for the weeks ahead. The Fed is still cautious about cutting rates, but the new tariff news is weighing on the US Dollar. This mix raises the chance of sharp, sudden moves.
Options Market Signals
This uncertainty is showing up in the options market. The Cboe EUR/USD Volatility Index has risen to 7.8% this week, up from the lows earlier this month. This suggests traders expect a wider range of outcomes for the pair in the near term.
The main theme of policy divergence is still limiting a stronger euro rally. The yield spread between German and US 2-year government bonds has widened further, which supports the dollar. That makes euro gains feel fragile and more driven by political headlines than by economic data.
With political risk higher after last week’s tariff announcement, buying volatility may be a sensible approach. Buying an at-the-money straddle on EUR/USD allows a position to benefit from a large move in either direction. This helps protect against being on the wrong side of the next major trade headline from the White House.
For those who think the recent low near 1.1771 will hold, selling out-of-the-money puts is another option. This strategy earns income from higher volatility while setting a clear risk limit. Still, caution is needed, because a sudden escalation in trade disputes could push the pair below this support.
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