EUR/USD trades near 1.0500 with bearish bias due to risk-off mood

• EUR/USD remains subdued as Trump's tariff plans dampen the market sentiment.
• President-elect Donald Trump plans to impose tariffs on imports from Mexico, Canada and China.
• The Euro struggles due to growing concerns over downside risks to the Eurozone economy.

EUR/USD pares its daily losses, trading around 1.0490 during the Asian hours on Tuesday. However, the pair may continue to depreciate due to dampened market sentiment following President-elect Donald Trump's announcement of planning to impose a 25% tariff on imports from Mexico and Canada, along with a 10% hike in tariffs on all Chinese goods entering the United States (US).

The US Dollar (USD) remains subdued following comments from Federal Reserve (Fed) officials on Tuesday. However, the USD's downside risks are limited, supported by strong preliminary S&P Global US Purchasing Managers' Index (PMI) data. These robust figures have strengthened expectations that the Fed may adopt a more gradual approach to further rate cuts.

Federal Reserve Bank of Chicago President Austan Goolsbee indicated that the Fed is likely to continue lowering interest rates toward a neutral stance that neither stimulates nor restricts economic activity. Meanwhile, Minneapolis Fed President Neel Kashkari highlighted that it remains appropriate to consider another rate cut at the Fed's December meeting, according to Bloomberg.

The Euro faces pressure amid growing concerns over downside risks to the Eurozone economy. These risks stem from uncertainties related to a potential second Trump administration, the ongoing war in Ukraine, and political instability in Germany and France. 

Markets have already fully priced in a 25 basis point (bps) rate cut by the European Central Bank (ECB) in December. Additionally, the likelihood of a more aggressive 50 bps rate reduction has increased to 58%, reflecting heightened market pessimism regarding the region's economic outlook.