Euro Rises as Dollar Falls after Trump’s Tariffs

The euro surged on Thursday, gaining significant ground against the US dollar as markets reacted to sweeping new tariffs announced by the Trump administration. The EUR/USD pair climbed to its highest level since October, fueled by a broader selloff in the greenback and investor unease over trade and economic uncertainty.

The newly unveiled tariffs include a baseline 10% duty on all US imports, with additional "reciprocal" tariffs calculated using a controversial formula. This has sparked backlash globally, with critics, including former Treasury Secretary Larry Summers, warning that the measures were imposed without sound data. Some of the tariffs, such as those on uninhabited territories, have drawn particular scrutiny.

US economic data released this week has added to investor anxiety. The ISM Services PMI dropped sharply to 50.8 in March, its lowest in nine months and a sign of slowing growth. The fallout from the tariffs has already started to weigh on business sentiment and consumer confidence, as seen in recent indicators. Economists and analysts alike now fear the new trade barriers could spark a broader economic downturn.

Friday's upcoming Nonfarm Payrolls (NFP) report is expected to provide clearer insight into how the labor market is faring amid rising trade tensions. Private payroll data released earlier showed stronger-than-expected job growth, but the market remains cautious. The NFP figures will likely influence expectations around the Federal Reserve’s next moves, particularly as inflation and employment data become more volatile.

The US dollar continued its decline on Friday, reaching a six-month low against the euro. Safe-haven currencies such as the Japanese yen and Swiss franc strengthened, while risk-sensitive currencies like the Australian and New Zealand dollars fell sharply. The dollar index, which tracks the USD against six major peers, dropped nearly 2%—its worst single-day performance since 2022.

Markets are now pricing in four potential interest rate cuts by the Fed this year, amid fears that the US economy could slip into recession. Bond yields have fallen as investors flock to safer assets, and gold prices surged to multi-month highs. Concerns about stagflation—where high inflation persists even as growth slows—are also mounting, complicating the Fed’s ability to maintain economic stability.

Trump's aggressive tariff strategy has shaken financial markets, weakened the dollar, and raised the risk of a global slowdown. While short-term optimism around job data may bring temporary relief, investors remain wary of the long-term consequences. All eyes are now on the Fed and upcoming economic indicators to gauge the next chapter in this increasingly volatile environment.