EUR/USD continues to pare brief tariff gains

• EUR/USD has extended into a second day of declines as Greenback flows resume.
• US inflation and sentiment data to rule the economic calendar this week.
• Markets are betting on Fed rate cuts, but inflation risks remain tricky.

On Monday, EUR/USD dropped again, marking a second consecutive day of declines for Fiber and pushing bids down to the 1.0900 level. Following a short break, the US Dollar is back in control of risk-off flows, with weakening investor sentiment further strengthening the Greenback across the board.

Fresh tariff threats crimp risk appetite

Following a tense week during which the US fully embraced a protectionist trade policy- despite lacking the necessary industry infrastructure- import tariffs have been established. The US is now applying a blanket 10% import tax on all goods from every country, along with varying "reciprocal" tariffs calculated by dividing US imports by exports. After a 34% tariff was levied on Chinese products, China responded with its own 34% tariff on all goods imported from the US. Unable to find alternative solutions, the Trump administration has threatened to impose an additional 50% tariff on all Chinese goods, which is scheduled to take effect in April 8.

Forex Today: Trump's tariffs remain in centre stage ahead of US CPI

This week, US data takes center stage again, with the Consumer Price Index (CPI) inflation figures set for release on Thursday. On Friday, we can expect the Producer Price Index (PPI) inflation numbers and the University of Michigan (UoM) Consumer Sentiment Index survey results. These will serve as the final key US inflation and sentiment indicators from the pre-tariff period of 2025, offering a vital measurement benchmark for the year's remaining months.

According to the CME's FedWatch Tool, investors are increasing their bets that the Federal Reserve (Fed) will start cutting interest rates to mitigate recession risks. Markets are factoring in nearly 200 basis points of rate reductions through the rest of 2025, even as the Fed issues cautious policy statements indicating that trade uncertainty complicates any potential rate cuts rates.

EUR/USD price forecast

EUR/USD briefly surged into multi-month highs above 1.1100 after the US Dollar took a beating thanks to the US's new tariff strategy. However, safe haven flows have resumed favoring the Greenback, sending Fiber down from new highs and retesting the 1.0900 handle with more losses on the cards.

EUR/USD daily chart