Euro Gains Stumble on Tariff Fears
EU Businesses Optimistic Amid US Trade Uncertainty
The Euro is currently testing a crucial resistance level against the US Dollar, fueled by broader market sentiment and a weakening dollar. However, looming tariff disputes between the United States and the European Union are casting a shadow over further gains.
ECB Eyes Economic Outlook Amid Trade Tensions
A recent European Central Bank survey reveals that European businesses maintain an optimistic outlook on the economic landscape. Yet, this optimism is tempered by significant concerns surrounding escalating trade uncertainties. The Euro was trading near 1.1665 at the time of reporting, a level that coincides with a descending trendline and recent highs.
US Dollar Weakens as Treasury Yields Dip
In the absence of major economic data releases from the U.S. on Monday, a shift in risk sentiment is driving the Euro higher while pressuring the US Dollar. Yields on U.S. Treasury notes are experiencing a notable reversal from recent peaks, with the 10-year note falling below 4.40%, thereby increasing downward pressure on the USD.
Trump Escalates Tariff Stance, EU Prepares Countermeasures
Trade negotiations between Washington and the EU remain a significant point of concern, with little concrete news emerging. U.S. Commerce Secretary Howard Lutnick expressed confidence in reaching a resolution. However, President Donald Trump has reiterated a firm August 1 deadline for tariffs, prompting the EU to prepare retaliatory measures should talks falter. President Trump has previously called for tariff baselines between 15% and 20%.
EUR/USD technically remains within the bearish channel, with key resistance at 1.1655-1.1665. https://t.co/t59e0Xf5lR
— FXStreetForexLive (@FXStreetForex) August 12, 2025
Key Week Ahead: ECB Decision and US Earnings
This week’s highlight will be the European Central Bank’s monetary policy decision on Thursday. While interest rates are expected to remain unchanged, comments from President Lagarde regarding the economic outlook and the potential impact of tariffs will be closely watched. In the U.S., investors are anticipating corporate earnings reports from tech giants like Alphabet and Tesla, alongside defense contractors such as Lockheed Martin, whose revenues may be boosted by increased defense spending.
Technical Outlook for EUR/USD
The EUR/USD pair is currently challenging resistance at 1.1670, where the upper boundary of a descending channel from early July converges with Friday’s high. Technical indicators suggest upward momentum, with the 4-hour Relative Strength Index (RSI) rising above 50. A sustained move above this level could signal a trend reversal, paving the way for further gains towards 1.1700 and 1.1735. Immediate support is noted at 1.1615, followed by the July 17 low at 1.1555.
US Consumer Sentiment Improves, Inflation Expectations Decline
Last Friday, the U.S. Michigan Consumer Sentiment Index saw an uptick to 61.8, exceeding forecasts and aligning with recent strong employment and consumption data. Consumers’ inflation expectations, however, have significantly decreased, a factor that could influence the Federal Reserve’s future policy decisions. In a separate development, the Wall Street Journal reported that U.S. Treasury Secretary Scott Bessent advised President Trump against removing Federal Reserve Chair Jerome Powell, citing the potential for economic turmoil.
