The euro finally snapped a six-day losing streak on Thursday, trading higher as EUR/USD rebounded from a key technical support level, while broader market sentiment remained on edge over the unfolding global tariff narrative. The U.S. dollar edged lower, retreating from a three-week high, as investors reacted to the implications of President Donald Trump’s latest round of tariff announcements.
Technical Rebound or Temporary Relief for the Euro?
After a prolonged decline, EUR/USD found solid support at the 200-day moving average, bouncing back from a session low of $1.0732 early in Asian trade. This zone at $1.0730 has historically served as a pivot point, and the sharp reaction suggests market participants remain keenly aware of its significance.
The pair’s failure to hold gains above $1.0950 — coinciding with a double-top formed since November’s U.S. election — raised concerns over the sustainability of euro strength in the face of diverging monetary policies. The European Central Bank continues its easing cycle, reducing yields across the region, while U.S. monetary policy remains comparatively restrictive.
Tariffs Return to Center Stage
Market jitters were further compounded after President Trump announced a 25% tariff on auto imports, effective April 3, with a broader wave of sector-targeted tariffs expected on April 2. The announcement raises fears of a renewed global trade war, reminiscent of the market disruptions seen in 2018–2019.
While initial reactions sent the dollar lower, analysts remain cautious. Swissquote’s Ipek Ozkardeskaya noted that the greenback could rebound if there’s no meaningful retaliation from major trading partners. However, a global tit-for-tat scenario would likely weigh on U.S. growth prospects, risk sentiment, and the dollar.
UK Budget Cuts, Debt Burden, and Sterling Risks
In the UK, Chancellor Rachel Reeves’ latest fiscal update drew strong attention as the government announced further spending cuts aimed at preserving fiscal discipline amidst stalling growth and rising borrowing costs.
The Office for Budget Responsibility (OBR) warned that Trump’s tariffs — if enacted and met with retaliation — could reduce the UK’s GDP by as much as 1%, citing the economy’s heavy exposure to global trade and elevated debt levels nearing 95% of annual output.
Despite hopes that Prime Minister Keir Starmer’s relationship with Trump could soften the blow, the market remains skeptical, with investors increasingly pricing in downside risks for sterling.
Technical Outlook: Sterling Under Pressure
GBP/USD has fallen below the Ichimoku Cloud on both the 4H and 1H timeframes, signaling short-term bearish momentum. Price action slipping under the key $1.2900 level now shifts focus toward the $1.2800 and $1.2750 support zones.
ING analysts warned that any further fiscal uncertainty or aggressive gilt issuance could trigger a renewed selloff in both UK bonds and the pound, similar to the January episode. With the BoE still expected to maintain a cautious stance, the balance of risk for GBP remains tilted to the downside.
Conclusion
With the euro testing key support, sterling facing renewed fiscal and political headwinds, and the dollar navigating the uncertain fallout of aggressive tariff policy, FX markets are entering a phase of high sensitivity to both technical levels and headline risk.
Traders should remain vigilant, as the week ahead promises continued volatility and opportunities, particularly across EUR/USD and GBP/USD pairs.
