EUR/USD remains firm as Trump raises tariffs cautiously

As US President Donald Trump announced lower-than-expected tariffs on China, EUR/USD stayed strong above 1.0400. ECB's Lagarde cautioned that the Euro bloc should be ready for US tariffs, while ECB's Stournaras said that if the US imposes tariffs on the Eurozone, the pace of policy easing could quicken.In Wednesday's North American session, the EUR/USD maintains its rise above the crucial support level of 1.0400. As investors assess the United States' (US) clear tariff measures to construct new positions, the key currency pair continues to rise.

Following a new two-week low of 107.75, the US Dollar Index (DXY), which measures the value of the US dollar relative to six major currencies, recovers intraday losses.United States (US) President Donald Trump is ready to hike 25% tariffs on Mexico and Canada and 10% on China, which will come into effect on February 1. Although he hasn't given specifics yet, Trump has also pledged to address trade imbalances with the Eurozone. Trump stated on Monday that he would either "raise tariffs or Europe buy more US oil and gas" to address the trade deficit. The US Dollar's (USD) demand as a safe haven is declining as a result of these tariff calls, which seem less alarming than what market players had expected from Trump's remarks during the election campaign.Traders may be forced to reduce their bets on the Federal Reserve (Fed) to maintain interest rates at their current levels for an extended period of time if Trump's tariff rises are less drastic than anticipated. Market investors currently anticipate that for the next three policy sessions, the Fed will maintain borrowing rates between 4.25% and 4.50%.