EUR/USD traded near 1.1800 in early Friday sessions, with softer Eurozone inflation offsetting uncertainty over US tariffs. Traders awaited Germany’s preliminary CPI data, while the US PPI report was also due.
A US Supreme Court ruling struck down the administration’s broad use of emergency powers to impose tariffs. In response, President Donald Trump imposed a blanket 15% levy on imports.
US Trade Representative Jamieson Greer said on Wednesday that Trump plans to raise the rate to 15% for many countries in the coming days. The authority is limited to a 150-day window unless Congress extends it.
EU lawmakers delayed approval of the bloc’s trade deal with the US on Monday, citing uncertainty over US tariff policy. The pause followed questions about how US measures may change.
Eurozone inflation fell to 1.7% in January, the lowest level in 16 months, while core inflation eased to 2.2% year on year. The figures increased expectations of a more dovish European Central Bank stance, which may pressure the euro against the dollar.
Looking back to early 2025, we saw EUR/USD caught in a tight range around 1.1800. The market was trapped between fears of US tariff policy weakening the dollar and low Eurozone inflation weighing on the euro. This standoff created a period of low directional movement but high underlying tension.
The 15% US tariff uncertainty from that time became a dominant theme, directly fueling inflationary pressures. US core PCE, the Fed’s preferred inflation gauge, subsequently climbed to 3.8% by the third quarter of 2025. This unexpected inflation kept the Federal Reserve from easing policy as many had expected.
On the other side of the pair, the weak Eurozone inflation reading of 1.7% in January 2025 was a clear warning signal. The European Central Bank did indeed adopt a more dovish stance, cutting its deposit facility rate by 25 basis points in June 2025. This policy divergence was a primary catalyst for the Euro’s weakness through the rest of the year.
This history shows how political announcements can override economic data, creating significant price swings and volatility. We saw implied volatility on EUR/USD 3-month options jump by over 30% in the second quarter of 2025 following those tariff decisions. Derivative traders should therefore price in a higher risk premium for geopolitical events.
Now, with the pair trading near 1.1250, the dynamic appears to be shifting again. Recent data shows Eurozone industrial production for January 2026 posted a surprise 0.5% gain, while initial US jobless claims have ticked up for three consecutive weeks. This could signal that the period of US economic outperformance is waning, suggesting a potential for EUR/USD to rebound.
