The EUR/USD pair recovered ground on Friday, climbing above 1.1600 as the US Dollar (USD) weakened following renewed US–China trade tensions. The Greenback’s slide, coupled with political stabilization in France, helped the Euro (EUR) rebound after four consecutive sessions of losses. At the time of writing, EUR/USD trades around 1.1606, up 0.37% on the day.
Dollar slumps on tariff threats as France regains political footing
The US Dollar came under broad selling pressure after US President Donald Trump threatened a “massive increase” in tariffs on Chinese goods, reigniting global trade war fears. The move triggered risk aversion across markets but weighed more heavily on the Greenback as investors reassessed the US economic outlook amid the ongoing government shutdown.
Meanwhile, in Europe, French President Emmanuel Macron reappointed Sébastien Lecornu as Prime Minister after his resignation earlier this week. Lecornu’s return to office provided a measure of political relief for French markets and the broader Eurozone.
In a statement on X, Lecornu pledged to “do everything possible to provide France with a budget by the end of the year and address the daily life issues of our fellow citizens,” adding that it was time to end the “instability that is harmful to France’s image and its interests.”
Market drivers: Fed commentary and sentiment data
Economic data from the United States painted a mixed picture. The University of Michigan’s Consumer Sentiment Index eased slightly to 55 from 55.1 in October, but remained stronger than expected. Inflation expectations for the next year edged down to 4.6%, while the five-year outlook held steady at 3.7%.
St. Louis Fed President Alberto Musalem reiterated that the central bank’s dual mandate is facing strain, with inflation still elevated while the labor market shows early signs of softening. He added that monetary policy currently sits between “modestly restrictive and neutral,” though overall financial conditions remain accommodative.
Money markets now fully price in a 25-basis-point rate cut at the Fed’s October 29 meeting, with odds at 94%, according to the Prime Market Terminal’s rate probability tool.
Technical outlook: EUR/USD stabilizes above 1.1600
EUR/USD’s recovery above 1.1600 suggests fading bearish momentum after the pair dipped below its 100-day Simple Moving Average (SMA) at 1.1633 earlier in the week. The Relative Strength Index (RSI) is trending toward the neutral 50 mark, hinting at consolidation in the near term.
Immediate support lies at 1.1550, followed by 1.1500. A break below these levels could expose the August 1 cycle low near 1.1390. On the upside, resistance is seen at 1.1650 and 1.1700, with a sustained move above the latter potentially opening the path toward 1.1800 and the July 1 high at 1.1830.
