EUR/USD rises to near 1.1400 as Trump extends tariff deadline on EU imports

• EUR/USD gains ground as President Trump extends the 50% tariff deadline on the EU imports until July 9.
• President Ursula von der Leyen said that the EU was prepared to move quickly in trade negotiations with the US.
• US markets continue to suffer as Moody's downgraded the US credit rating.

EUR/USD extends its gains for the second successive session, trading around 1.1390 during the Asian hours on Monday. The Euro (EUR) gains ground as Bloomberg reported that US President Donald Trump agreed to extend the 50% tariff deadline on the European Union (EU) until July 9. On Sunday. European Commission President Ursula von der Leyen posted on social media that the EU was ready to move quickly in trade talks with the United States (US) but requires more time to reach a deal. US markets will be closed due to the Memorial Day holiday on Monday.

On Friday, President Trump threatened in a post on Truth Social to impose 50% tariffs on imports from the European Union as Brussels sent a not-so-good trade proposal to Washington. Trump said, "Our discussions with them are going nowhere! Therefore, I am recommending a straight 50% tariff on the European Union, starting on June 1, 2025."

Additionally, the EUR/USD pair appreciates as the US Dollar (USD) continues to lose ground due to the uncertainty surrounding US economy. US fiscal deficit could increase further when Trump's "One Big Beautiful Bill" goes through the Senate floor, increasing the risk of bond yields staying higher for longer. Higher bond yields can keep borrowing costs higher for consumers, businesses and governments.

US markets remains under pressure amid deteriorating US debt profile as Moody's downgraded the US credit rating from Aaa to Aa1. Moody's now projects US federal debt to climb to around 134% of GDP by 2035, up from 98% in 2023, with the budget deficit expected to widen to nearly 9% of GDP.

Fed officials continue to favor keeping rates on hold due to lingering uncertainty over Trump's tariff policies. On Friday, Chicago Federal Reserve (Fed) President Austan Goolsbee said that Trump's latest tariff threats likely postpone changes to interest rates. Meanwhile, Kansas City Fed President Jeffrey Schmid noted that policymakers will gauge hard data before formulating interest rate decisions, and the Fed needs to be careful how much emphasis it puts on soft data.