EURUSD weakens as the US Dollar steadies on trade tensions and strong economic data prospects.
The EURUSD pair is trading near the psychological 1.1400 level during the European session on Tuesday, facing modest downward pressure as the US Dollar (USD) holds firm amid deepening geopolitical and economic uncertainty. Investors are seeking clarity on the trajectory of US-China trade relations after comments from US Treasury Secretary Scott Bessent placed the onus squarely on Beijing to initiate progress in trade talks.
Despite trading within a relatively narrow range, the euro faces mounting headwinds from both internal and external forces. While the US Dollar Index (DXY) edges higher toward 99.20, it remains within Monday’s range, reflecting the market’s cautious optimism as traders await a slew of top-tier US macroeconomic data that could shape the Federal Reserve’s policy path.
US-China Trade Tensions Resurface, Dampening Risk Appetite
Investors’ risk sentiment jolted once again by the latest developments surrounding US-China trade negotiations. Treasury Secretary Scott Bessent, speaking on CNBC’s “Squawk Box,” signaled a hardening of the US stance, asserting that China bears the responsibility to ease tensions and re-engage in talks. “I believe that it’s up to China to de-escalate, because they sell five times more to us than we sell to them,” Bessent remark, reinforcing the notion that Washington is not inclined to initiate reconciliation.
This comment follows a week of conflicting narratives from both Washington and Beijing. US President Donald Trump claimed that Chinese President Xi Jinping has reached out multiple times to discuss trade matters a statement swiftly denied by China’s Foreign Ministry. The contradictory accounts have increased market skepticism about a near-term breakthrough in the longstanding trade dispute, undermining sentiment in risk-sensitive assets and putting a mild bid under the safe-haven USD.
Market Focus Turns to Key US Economic Data
Beyond the trade narrative, this week’s US economic calendar is packed with potentially market-moving releases. Investors will dissect data on preliminary Q1 GDP, ISM PMI, ADP Employment Change, and the closely watched Nonfarm Payrolls (NFP) report for April. Additionally, the Personal Consumption Expenditures (PCE) Price Index the Fed’s preferred inflation gauge will be under scrutiny.
In the immediate term, attention turns to the Job Openings and Labor Turnover Survey (JOLTS) for March, due during Tuesday’s US session. Market expectations are for a slight decline to 7.5 million job openings from 7.56 million in February. Any deviation from this forecast could prompt volatility in the US Dollar and, by extension, the EURUSD pair.
ECB Officials Hint at More Rate Cuts Amid Weak Eurozone Outlook.
On Monday, ECB Finnish central bank governor Olli Rehn emphasized that the central bank should be open to interest rates falling below the so-called “neutral” rate if inflation remains persistently weak.
“We must analyse all options with an open mind and not a priori rule out rate cuts below the neutral rate,” Rehn said, highlighting increasing concerns that Eurozone inflation could continue undershooting the ECB’s 2% target, particularly in the face of external shocks such as Trump’s tariff policies.
His comments were echoed by Bank of France Governor François Villeroy de Galhau, who reaffirmed that the ECB still has room to lower borrowing costs. “We still have a margin for rate cuts,”.
Eurozone Economic Data: Mixed but Sluggish
The macroeconomic landscape in the Eurozone remains patchy at best. On Tuesday, Spain a major Eurozone economy reported that its GDP grew by just 0.6% in the first quarter, missing expectations of 0.7% and trailing the previous quarter’s 0.8% growth. Though not an outright contraction, the data reinforces fears of stagnation in the broader Euro area.
Meanwhile, Spanish inflation data showed a year-on-year increase of 2.2% in April, while monthly price growth moderated to 0.6% from 0.7% in March. These figures suggest that while inflation is not collapsing, it remains below levels that would justify monetary tightening, further supporting the ECB’s dovish lean.
Traders now looking ahead to the Eurozone’s flash Q1 GDP and Harmonized Index of Consumer Prices (HICP) data, set to be release on Wednesday and Friday, respectively. These data points will be crucial in determining whether the ECB can maintain its current stance or will be compell to take more aggressive action.
Technical Outlook: EURUSD Clings to Key Support Zone
From a technical perspective, EURUSD continues to hover near the 1.1400 handle, which is acting as short-term support. A sustain break below this level could trigger further downside toward 1.1350 and 1.1300—areas where buyers have previously emerge.
On the upside, resistance is seen around 1.1450 and then at the more significant 1.1500 psychological level. A decisive move above these barriers would require a combination of stronger Eurozone data and signs of easing geopolitical tension—both of which seem unlikely in the near term.
Momentum indicators such as the Relative Strength Index (RSI) are showing signs of neutrality, suggesting that neither bulls nor bears currently have full control. However, the downward tilt in the pair hints at a bearish bias unless a fundamental catalyst emerges.
Market Sentiment and Conclusion
The euro remains on the defensive as multiple bearish drivers converge—ranging from a resurgent US Dollar supported by upcoming economic data to dovish messaging from the ECB and persistent uncertainty surrounding global trade. Unless the Eurozone’s upcoming GDP and inflation data surprise to the upside, the EURUSD pair may struggle to regain upward traction in the coming sessions.
Investors advised to monitor not just economic releases, but also ongoing political developments, particularly in the US and China, which have the potential to sharply influence sentiment and currency flows.
