The Euro reached a one-month high against the Dollar on Monday after US President Donald Trump backed off plans to impose 50% tariffs on European Union imports starting 1st June, following the EU’s request for more time to “reach a good deal.”
Meanwhile, the Dollar extended its slide against a wide range of currencies, as Trump’s policy U-turns, along with his expansive spending and tax-cut proposals still under consideration, dampened investor appetite for US assets.
“The ‘Sell America’ theme, which obviously was the dominant theme back in April, is back on show,” stated Ray Attrill, head of FX research at National Australia Bank.
“Markets have probably taken the view – and probably rightly so – that where we land eventually on a tariff situation between the US and the EU is not going to be at 50%, but how we get there is frankly anybody’s guess at the moment.”
The Euro rose as much as 0.55% to hit $1.1418, its highest level since 29th April, before easing slightly to $1.1394, still up 0.36% on the day and 10% higher year-to-date, Reuters reports.
The British pound also gained ground, rising 0.39% to reach its strongest level since February 2022, and was last up 0.25% at $1.3574.
Although overall weaker due to improved market sentiment, traditional safe-haven currencies like the Yen and Swiss Franc still gained against the greenback.
The Dollar fell as much as 0.24% to 142.23 Japanese Yen, its lowest point this month, and dipped to a 2.5-week low of 0.8193 against the Franc.
Whereas the Dollar index, which measures the greenback against a basket of six major currencies, slipped 0.15% to 98.93, building on last week’s 1.9% drop.
On Sunday, President Trump announced a delay in imposing tariffs on European Union goods until 9th July, following a conversation with European Commission President Ursula von der Leyen, who requested more time to negotiate a deal.
The new deadline coincides with the end of a 90-day pause on the “Liberation Day” tariffs Trump introduced on 2nd April targeting the EU and other trade partners.
The swift de-escalation, coming just two days after Trump’s tariff threat, highlighted the unpredictable nature of US trade policy. However, it also reassured investors that compromises are possible, easing fears of a global economic slowdown.
“Following Trump’s latest U-turn, we will, of course, have to wait and see what happens next. It is possible that a deal with the European Union will be reached by 9th July,” according to Commerzbank currency strategist Michael Pfister.
“However, it is questionable what has changed in terms of the fundamental problems following a phone call. One thing should be clear after Friday’s announcement: the brief respite from tariffs that we enjoyed was only temporary,” he added.
In what may be an acknowledgement of investor concerns over fiscal stability, Trump said on Sunday that his expansive spending and tax-cut bill is likely to undergo “significant” revisions in the Senate.
The House version of the bill is projected to add roughly $3.8 trillion to the federal government’s $36.2 trillion debt over the next 10 years, according to estimates from the Congressional Budget Office.
“What seems clear from the reconciliation bill … is that Trump and (Treasury Secretary Scott) Bessent have shifted tactics, swivelling hard from fiscal conservatism and reduced spending to an outright pro-growth policy stance,” stated Chris Weston, head of research at Pepperstone.
“It is fast becoming a consensus view that the USD is on the path to a multi-year decline.”