Euro declines as Trump threatens 30% tariffs on the EU

SINGAPORE (Reuters)

The euro dropped to a three-week low on Monday following President Trump’s threat to impose a 30% tariff on imports from its two main U.S. trading partners, effective August 1.

This latest tariff announcement was shared over the weekend in letters directed to European Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum, which were published on his social media platform.

The European Union reacted, stating that both it and Mexico had been unfairly accused regarding the tariffs. Nevertheless, the EU decided to maintain a suspension of U.S. tariffs until early August while aiming for a negotiated solution.

Initially, the currency market’s reaction to Trump’s tariff threat was muted during early trading in Asia, but by the end of the session, the euro had slid about 0.15%, closing at approximately $1.1675.

Meanwhile, the dollar rose by 0.2% against the Mexican peso, reaching 18.6630. In contrast, the dollar’s gains were somewhat limited elsewhere, with the British pound down just 0.04% at $1.3485 and the Japanese yen appreciating by 0.1% to $147.27.

It seems investors are becoming less sensitive to Trump’s tariff threats. The shifting dynamics in the global trade landscape have made it challenging for the dollar to maintain record highs.

“It’s tough to tell if the muted market response over the past week reflects resilience or complacency,” commented Taylor Nugent, a senior economist at the Bank of National Australia.

“However, pricing in the upcoming tariff situation from August 1 is tricky, especially given that the deadline for previous rounds of tariffs came and went without any increases.”

In other currency movements, the Australian dollar saw a slight rise of 0.02% to $0.6575, while the New Zealand dollar dipped by 0.07% to $0.6004.

In unrelated news, Trump remarked on Sunday that it would be beneficial if Federal Reserve Chairman Jerome Powell stepped down, further questioning the central bank’s independence while suggesting interest rate cuts.

Traders are looking forward to insights from the upcoming June inflation data set for release on Tuesday, which could shed light on future U.S. monetary policy. The market currently anticipates a 50 basis points easing by December.