EUR/USD traded near 1.1800 in early Friday trading. Softer Eurozone inflation offset worries about US tariffs. Traders waited for Germany’s preliminary CPI, while the US PPI report was also due.
A US Supreme Court ruling struck down the administration’s wide use of emergency powers to impose tariffs. After that, President Donald Trump set a blanket 15% tariff on imports.
US Trade Representative Jamieson Greer said Wednesday that Trump plans to lift the rate to 15% for many countries in the coming days. The authority lasts 150 days unless Congress extends it.
EU lawmakers on Monday delayed approval of the bloc’s trade deal with the US. They cited uncertainty over US tariff policy. The delay followed questions about how US measures could change.
Eurozone inflation fell to 1.7% in January, the lowest in 16 months. Core inflation also eased to 2.2% year on year. This raised expectations that the European Central Bank may turn more dovish, which could weigh on the euro versus the dollar.
Looking back to early 2025, EUR/USD stayed in a tight range near 1.1800. The market was pulled in two directions. US tariff fears could weaken the dollar, while low Eurozone inflation hurt the euro. The result was little clear trend, but high tension under the surface.
At the time, uncertainty around the 15% US tariff became the key theme. It also added to inflation pressure. US core PCE, the Fed’s preferred inflation measure, later rose to 3.8% by Q3 2025. That surprise kept the Federal Reserve from cutting rates as many had expected.
On the euro side, the weak 1.7% inflation reading in January 2025 was an early warning. The ECB did turn more dovish and cut its deposit facility rate by 25 basis points in June 2025. This policy split was a main driver of euro weakness through the rest of the year.
This period shows that political headlines can overwhelm economic data. They can also trigger sharp moves and higher volatility. In Q2 2025, implied volatility on 3-month EUR/USD options jumped more than 30% after the tariff decisions. Derivatives traders may need to price in a bigger risk premium for geopolitical events.
Now, with EUR/USD near 1.1250, the story may be changing again. Eurozone industrial production in January 2026 rose 0.5%, beating expectations. Meanwhile, initial US jobless claims have increased for three straight weeks. This may suggest the US growth edge is fading, which could support a rebound in EUR/USD.
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