EUR/USD Rebounds as EU-US Trade Tensions Return

Key Moments

EUR/USD Recovers as Trade Risks Return

EUR/USD bounced back into the mid-1.16-1.17 zone after dipping earlier in the session. This came as traders reassessed renewed trade tensions between the US and the EU. At the same time, uncertainty over a possible Supreme Court ruling on tariff legality limited strong USD bets. Danske Bank FX analyst Kristoffer Kjær Lomholt said the overall environment still looks negative for the dollar.

Legal and Geopolitical Uncertainty Keeps Traders Cautious

Lomholt noted that EUR/USD initially fell before recovering. Traders were trying to interpret the latest developments in EU-US trade relations. Meanwhile, the possibility of a Supreme Court decision on tariffs added another layer of uncertainty. As a result, investors avoided large, one-sided bets based on the weekend’s events.

Moreover, the risk of a NATO split is also becoming a factor. Lomholt said these issues are likely to dominate the agenda in the near term. Markets will watch upcoming speeches and meetings closely.

Policy Calendar: Davos and EU Leaders Meeting

Lomholt pointed out that President Trump is set to speak at Davos tomorrow. Then, EU leaders will meet on Thursday. Both events could provide fresh signals on trade policy and transatlantic relations.

EU Strategy and the Dollar Outlook

A key question for markets is whether European leaders will retaliate with one-for-one tariffs. This approach would mirror China’s strategy last year. The goal would be to pressure Washington into easing tensions.

Lomholt added that these factors, along with rising political risk, support a USD-negative view. In his view, the dollar may remain under pressure unless trade tensions ease.