The EUR/USD currency pair concluded Wednesday’s trading session with a modest uptick of 0.17%, stabilizing near 1.1715. While the pair showed signs of recovery following the Federal Reserve’s June FO

MC meeting minutes, ongoing global trade tensions capped further upside momentum. As the new Asian session unfolds, the pair remains largely unchanged, reflecting the market’s cautious mood. The professionals at Fimatron explain this complex topic in a clear and detailed article.

Dovish Fed Undermines Dollar Strength

The June FOMC minutes, released Wednesday, highlighted a growing consensus within the Federal Open Market Committee for at least one interest rate cut before the end of 2025. This dovish tone weakened the US dollar, offering temporary support to the Euro. However, the strength of the Greenback, reflected in a flat US Dollar Index (DXY) at 97.51, continues to limit EUR/USD upside.

While most Fed officials see a single rate cut as appropriate, a minority are open to a July rate cut, provided incoming economic data justifies such a move. The minutes stated that the current federal funds rate remains suitable, with stagflationary risks seen as having diminished, though not eliminated.

Crucially, some FOMC members expressed concern over persistent inflationary pressures, citing inflation expectations that have slightly increased. This guarded optimism indicates that while the Fed may loosen policy, it will do so cautiously, balancing price stability with growth risks.

Tariff Tensions Resurface, Global Trade Uncertainty Builds

The relief brought by the Fed’s dovish outlook was partly overshadowed by renewed trade war threats. The United States reactivated its tariff agenda, sending official notifications to countries including the Philippines, Moldova, Algeria, Iraq, Libya, Brunei, Sri Lanka, and Brazil. 

The proposed tariffs range between 20% and 50%, reigniting fears of disrupted global trade flows.

Markets noted that Brazil was hit hardest, with a proposed 50% duty, while other nations faced between 20% to 30%. Notably, the European Union (EU) was not on the tariff list, offering some relief to Eurozone traders. However, investors remain wary of a broader escalation that could eventually involve EU exports.

Despite the EU avoiding the initial wave of tariff hikes, the Euro’s momentum was subdued. There were reports that Washington and Brussels had seen progress in a framework trade agreement, as EU spokesperson Olof Gill confirmed that European Commission President Ursula von der Leyen had a “good exchange” with the US President earlier this week. 

Euro Struggles to Capitalize Despite Trade Relief

Although the Euro avoided direct tariff-related losses, its gains were tempered by the broader risk-off environment. Market participants remained hesitant amid headlines that the US President might expand protectionist measures in sectors sensitive to European producers. 

Additionally, the Eurozone economy continues to grapple with subdued growth and sticky inflation, leaving little room for the European Central Bank (ECB) to diverge meaningfully from the Fed’s stance.

The absence of fresh ECB policy guidance leaves the Euro vulnerable to broader risk sentiment. With EUR/USD trading flat near 1.1715, market momentum hinges on upcoming US macroeconomic releases, including non-farm payrolls (NFP) and consumer price index (CPI) data. 

Any softening in US employment or inflation could tip the Fed further toward easing, potentially lending support to the Euro.

Market Outlook: Data, Tariffs, and Central Bank Cues

Looking ahead, the EUR/USD pair remains caught between a dovish Fed narrative and the uncertainty stemming from escalating trade tensions. While the Fed minutes offered a reprieve, the currency markets appear reluctant to price in a full rate cut cycle without confirmation from high-frequency economic data.

Investors are likely to focus on:

• US labor market data: Key for validating or disqualifying the Fed’s readiness to cut.
• Headline inflation metrics: Persistent inflation could delay any monetary easing.
• Geopolitical headlines: Any further tariff threats from Washington could spook markets.
• ECB commentary: Any hawkish signals from Eurozone policymakers could tip sentiment.

In the near term, technical support for EUR/USD lies near 1.1675, with resistance capped at 1.1750. A break below support would expose the 1.1620 region, while a breach of resistance could pave the way for a retest of 1.1800.

Conclusion

The EUR/USD flatlined on Wednesday, reflecting a tug-of-war between dovish Fed expectations and escalating trade war anxieties. While the Federal Reserve’s minutes opened the door for a possible July rate cut, rising global protectionism and uncertainties in US foreign trade policy have added complexity to the market’s directional bias.

For now, the Euro trades sideways, its performance tethered to a delicate mix of central bank cues, macroeconomic indicators, and geopolitical developments. Traders should brace for heightened volatility as tariff rhetoric and data surprises increasingly drive intraday moves in the coming sessions.