EUR/USD remains stable above 1.1600 as tensions rise between the US and China. President Trump has announced plans for 100% tariffs on Chinese imports. The Euro gains strength as tensions in France decrease. President Macron is expected to appoint a new prime minister. During Asian trading hours, EUR/USD is around 1.1620, up nearly 0.5% from the previous session.

Trade War Concerns

President Trump has said he won’t meet with China’s President Xi Jinping at the upcoming summit in South Korea. China has warned of retaliation if the US goes ahead with the 100% tariffs, raising concerns about the trade war’s effects on the US economy. The US government shutdown delays federal paychecks that were supposed to be issued on Friday, with the disruption possibly lasting until Tuesday. The government will observe the Columbus Day holiday, and a resolution to the shutdown doesn’t seem close. EUR/USD benefits as the Euro profits from political stability in France. Meeting notes from the European Central Bank (ECB) show a unified agreement that current policy and interest rates are suitable for handling potential economic challenges. Inflation figures, economic data, and the trade balance play a big role in the Euro’s value. Strong economic news and a positive trade balance help lift the Euro, while weak data can cause it to drop.

Historical Context and Current Trends

Looking back, it’s notable that EUR/USD is holding above 1.1600 in light of issues like Trump-era tariffs and government shutdowns. Today, October 13, 2025, the situation has changed significantly, with the pair trading much lower around 1.0850. The era of unpredictable 100% tariff threats has given way to more structured, albeit still tense, trade dialogues between the US and China. The anticipated weakness in the US dollar hasn’t occurred in the long term; instead, we’ve seen ongoing dollar strength. This stability is driven more by a proactive Federal Reserve, which has maintained the Fed funds rate at 5.0% to address persistent inflation, recently recorded at 3.1% year-over-year. Previous concerns over government shutdowns seem minor compared to the current market focus on central bank policies. Similarly, the Euro’s influences have shifted from domestic French politics to broader actions of the ECB. The ECB is also facing inflation challenges, with the latest Eurozone HICP data showing a rate of 2.9%, well above its 2% target. As a result, the ECB’s deposit facility rate remains steady at 4.25%, placing monetary policy at the forefront of Euro valuation. For derivative traders, the current environment of high, yet possibly peaking, interest rates suggests a focus on volatility. Buying options like straddles or strangles ahead of crucial US and Eurozone inflation reports in the upcoming weeks could be a smart move. Any deviation from forecasts could lead to a significant shift in central bank policies and a sharp adjustment in EUR/USD. Given the wide interest rate gap favoring the US dollar, the carry trade of being short EUR/USD remains appealing. However, with both central banks indicating a “higher for longer” strategy, the pair may stay within a narrow range. This suggests strategies such as selling out-of-the-money puts and calls to collect premiums, betting that the pair won’t break key support or resistance levels soon. Create your live VT Markets account and start trading now.

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