EUR/USD gains as investors ignore Trump’s tariff plan for its neighbours.

EUR/USD advances to near 1.0500 as investors ignore renewed Trump’s tariff fears.
US President Trump confirms that the plan of imposing 25% tariffs on Canada and Mexico is still on.
The leader of CDU, Frederich Merz, is unlikely to join hands with Far-Right.

EUR/USD rebounds to near 1.0500 in North American trading hours on Tuesday. The major currency pair gains as the US Dollar declines despite renewed fears of a global trade war. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, declines to near 106.45.

On Monday, US President Donald Trump said that his plans of imposing 25% tariffs on Canada and Mexico on March 4, which were delayed by a month after both nations agreed to tighten border activities, are still on. “The tariffs are going forward on time, on schedule,” Trump said from the White House. Renewed fears of tariffs by Donald Trump on his North American partners had resulted in some stability in the US Dollar (USD). The USD Index recovered from its 11-week low of 106.10 to near 106.70.

On the economic front, US Durable Goods Orders and the Personal Consumption Expenditures Price Index (PCE) data for January will be the next major trigger for the US Dollar, which will be released on Thursday and Friday, respectively. Investors will pay close attention to the PCE inflation data, which is the Federal Reserve’s (Fed) preferred inflation gauge, as some officials have shown concerns over the stalling disinflation trend lately.

In Tuesday’s session, investors will focus on the US Consumer Confidence data for February, which will be released at 15:00 GMT.

Daily digest market movers: EUR/USD gains as Euro rises despite soft Q4 Eurozone Negotiated Wage Rate

EUR/USD rises as the Euro (EUR) strengthens against its peers despite uncertainty about the outcome of the victorious Frederich Merz-led-conservatives’ negotiations with other parties to form a coalition government.
The leader of the Christian Democratic Union of Germany (CDU) Frederich Merz – likely the next German Chancellor – is expected to face heated negotiations to fulfill his economic agenda of loosening the ‘debt brake’ rule to increase the limit of the budget deficit, which is currently 0.35% of the Gross Domestic Product (GDP). The most likely scenario is Conservatives forming a coalition government with the Social Democratic Party (SPD) of current Chancellor Olaf Scholz. Merz is unlikely to invite Alice Weidel’s Alliance for Germany (AFD), also known as Far-Right, to form a government.
Market participants doubt that Frederich Merz will uplift the fractured German economy as a coalition government historically results in an obstructive parliament across the globe. This led to investors liquidating their longs on the Euro (EUR) in the North American session on Monday after strong initial gains. The German economy has been contracting for the last two years, and its outlook is weak due to fears of potential tariffs by United States (US) President Donald Trump.
ECB policymaker and Bundesbank President Joachim Nagel said last week that our “strong export orientation” makes us “particularly vulnerable” to potential Trump tariffs.
On the economic front, Eurozone Q4 Negotiated Wage Rates data came in at 4.12%, down from 5.43% in the previous quarter. Soft Eurozone wage data appears contrary to comments from the European Central Bank (ECB) Executive Board Isabel Schnabel who said last week that the central bank could announce a “halt” in the policy-expansion cycle after she warned that domestic inflation was “still high” and wage growth was “still elevated”, amid “new shocks to energy prices. Decelerating wage growth would boost expectations of more ECB interest rate cuts this year.