EUR/USD recovers intraday losses and flattens to near 1.0960 in Monday's European session. The major currency pair bounces back as the US Dollar (USD) slides in a risk-averse market environment, driven by the imposition of worse-than-expected reciprocal tariffs by United States (US) President Donald Trump on Wednesday.
The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, slumps to near 104.40.
Reciprocal tariffs announced by US President Trump have spooked global markets, resulting in equities melting down across the globe. However, Trump is not concerned about investors losing trillions from the world stock market and expects that higher levies will bring a lot of money to the US each year.
"I don't want anything to go down. But sometimes you have to take medicine to fix something," Trump said while speaking at Air Force One over the weekend.
Theoretically, the appeal of the US Dollar strengthens amid heightening global tensions, given its safe-haven status. Still, it is underperforming as Trump's tariffs have exposed the US economy to a recession.
Market experts have become increasingly concerned over the US economic outlook, assuming that the real burden of higher import duties will be on domestic importers.
Investment banking firm JP Morgan has forecasted that the US economy could end the year with a 0.3% decline in the Gross Domestic Product (GDP) growth.
Also, Federal Reserve (Fed) Chair Jerome Powell stated on Friday that the President's protectionist policies could lead to an increase in inflationary pressures and slower economic growth.
Powell still supports interest rates remaining in the current range of 4.25%-4.50% as it is "too soon to say what will be the appropriate path for monetary policy."
Meanwhile, Donald Trump has urged the Fed to start cutting interest rates as conditions have become favorable, though his post on Truth.Social during European trading hours.
"Oil prices are down, interest rates are down (the slow moving Fed should cut rates!), food prices are down, there is no inflation, and the long time abused USA is bringing in billions of dollars a week from the abusing countries on tariffs that are already in place," Trump wrote.
Source: FXStreet
