EUR/USD recovers above 1.0300 in Monday's European session after a weak opening around 1.0280. The major currency opened on a weak note as investors rushed to the safe-haven fleet on renewed United States (US) President Donald Trump's tariff fears.
The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, gives up majority of its intraday gains and wobbles around 108.20. However, the outlook of the USD Index remains firm on renewed fears of a global trade war.
Over the weekend, President Trump threatened to raise 25% tariffs on imports of steel and aluminum, as well as reciprocal tariffs on those nations where he saw unfair trade practices.
The biggest casualty of Trump's decision of 25% tariffs on metals is expected to be Canada, the largest exporter of aluminum to the US. The pressure of higher levies on metals will also be borne by Mexico, Brazil, Vietnam, and South Korea, leading exporters to the US.
The impact of reciprocal tariffs is expected to be lethal on the Eurozone, which charges 10% tariffs on automobile imports from the US and pays 2.5% import duty for domestic autos supplied to it.
Such a scenario will be unfavorable for the Euro (EUR), which is already vulnerable due to growing economic contraction risks and inflation undershooting the European Central Bank's (ECB) target of 2%.
Last week, analysts at Macquarie warned that a US tariff bomb would likely find "fertile ground in the EU," escalating unresolved issues rapidly into trade tensions, given that "Europe is target-rich".
Source: FXStreet
