EUR/USD rises to near 1.1700 due to Trump's tariff threats on European Union

• EUR/USD gains ground as the US Dollar declines due to rising global trade tensions.
• Trump announced that a 30% tariff on imports from the European Union and Mexico will take effect on August 1.
• The European Union announced that it will extend its suspension of retaliatory measures against US tariffs until early August.

EUR/USD halts its three-day losing streak, trading around 1.1700 during the Asian hours on Monday. The pair gains ground as the US Dollar (USD) loses ground due to escalating global trade tensions. On Saturday, US President Donald Trump announced a 30% tariff on imports from the European Union (EU) and Mexico starting August 1. He also proposed a blanket tariff rate of 15%-20% on other trading partners, an increase from the current 10% baseline rate.

In response, the European Union announced on Sunday that it will extend its pause on retaliatory measures against US tariffs until early August, in hopes of reaching a negotiated agreement. EU Commission President Ursula von der Leyen emphasized the bloc's "two-track" strategy, continuing dialogue while preparing for possible retaliation.

German Chancellor Friedrich Merz expressed strong commitment to securing a deal, warning that a 30% tariff would hit "at the core" of Germany's export-driven economy. Von der Leyen added that the EU's Anti-Coercion Instrument, which enables robust countermeasures, remains off the table for now, stating, "we are not there yet."

However, the upside of the EUR/USD pair could be restrained as the US Dollar may regain is ground amid traders adopting caution on sentiment surrounding the US Federal Reserve (Fed) to hold interest rates steady as it waits to see the impact of tariffs on price pressures. Chicago Fed President Austan Goolsbee stated that ongoing trade policy at the hands of Trump's constant tariff threats could hamper the ability of the Fed to deliver rate reductions that both the broader market and Trump himself want to see.

The US government posted a $27 billion budget surplus in June, fueled by a surge in customs duties revenue, which reached a record $27.2 billion. This jump in tariff collections, largely stemming from policies introduced during the Trump administration--contributed to a 13% increase in total budget receipts, which rose to $526 billion. Meanwhile, federal spending declined by 7% to $499 billion.