EUR/USD trades below 1.1250, eases due to ECB dovish signals

• EUR/USD faces pressure after ECB's Rehn suggested that the central bank could consider cutting interest rates at its upcoming meeting.
• The risk-sensitive Euro found some support from renewed optimism around US-China trade talks held in Geneva.
• Investors now look to Washington's response to the European Commission's proposed countermeasures against US tariffs.

EUR/USD is retreating from gains posted in the previous session, trading near 1.1240 during Monday's Asian session. The Euro (EUR) faces pressure as European Central Bank (ECB) official Olli Rehn indicated last week that the ECB may consider cutting interest rates at its next meeting--provided upcoming forecasts confirm a continued disinflation trend and slowing economic growth.

Despite this, the EUR/USD pair found some support from optimism surrounding US-China trade talks held in Geneva. Both sides reported "substantial progress" after two days of negotiations aimed at de-escalating the ongoing trade dispute. China's Vice Premier He Lifeng called the discussions "an important first step" in stabilizing bilateral relations, while US Treasury Secretary Scott Bessent echoed the sentiment, citing meaningful progress.

Markets now await Washington's response to the European Commission's proposed countermeasures against US tariffs. On Thursday, the Commission launched a public consultation outlining potential tariffs on up to €95 billion worth of US imports should trade negotiations break down.

Meanwhile, the US economic outlook remains uncertain. Federal Reserve (Fed) officials have flagged the risk of stagflation, with Governor Michael Barr warning that rising tariffs could disrupt supply chains--pushing inflation higher while dampening growth and increasing unemployment. Investors remain cautious, as further escalation in trade tensions could pose serious challenges to the US economy.