Euro backs off two-month high on Trump's tariff threats

The euro lost ground in European trade on Thursday, extending losses for the second session against the dollar away from two-month highs on profit-taking after Trump’s threats of imposing tariffs on the EU.

Also recent bullish remarks by some ECB officials hurt the odds of an ECB interest rate cut in March with traders now awaiting February inflation data for Spain and Germany. 

The Price

The EUR/USD pair fell 0.25% today to $1.0459, with a session-high at $1.0492.

The euro closed down 0.3% on Wednesday, the first loss in three days on profit-taking away from a two-month high at $1.0528.

Trump’s Tariffs

Trump spoke about a 25% additional tax on European imports, including cars, in order to reduce the giant trade deficit with the EU.

He accused the EU of taking advantage of the US with the $300 billion trade deficit, asserting the tariffs will be imposed soon.

He said the EU doesn’t take US cars or agricultural products, but the US takes everything from them, including millions of cars and huge amounts of food and agricultural products.

EU leaders asserted in a Brussels summit their readiness to retaliate if the US imposed tariffs, however, they asserted the importance of negotiations and avoiding escalation.

European Rates

European Central Bank President Christine Lagarde said recent positive developments in the eurozone indicate a rate cut isn’t an urgent matter.

ECB member Isabel Schnabel asserted the importance of not rushing into taking more monetary easing steps, as interest rates are approaching neutral levels already.

Following such remarks, the odds of an ECB 0.25% rate cut in March fell from 65% to 55%.