Euro to US Dollar Forecast: EUR Dips as China-US Ceasefire Boosts USD

May 12, 2025 - Written by Tim Boyer

STORY LINK Euro to US Dollar Forecast: EUR Dips as China-US Ceasefire Boosts USD

The Euro posted losses in early Europe following statements from the US and China that bilateral trade talks over the weekend had been constructive.

There was a further dollar surge after the European open as US Treasury Secretary Bessent stated that there was an agreement to lower tariffs by 115% for a 90-day period starting on May 14th.

The Euro to Dollar (EUR/USD) exchange rate slumped to 1-month lows below 1.1100 before a tentative recovery to 1.1130.

Scotiabank noted that EUR/USD did have support around 1.1150. Failure to regain this level would increase the threat of a slide to 1.10.

The US tariffs on Chinese imports will be cut to 30% from 145% while the tariffs on US exports to China will be lowered to 10% from 125% for the same period.

According to the statement; “both countries will establish a mechanism to continue discussions about economic and trade relations."

Markets will be wary that the clock is ticking on all aspects of US trade policy with wider reciprocal tariffs due to come in on July 9th.


Pepperstone strategist Ahmad Assiri commented; “Under the surface, this move seems more like an effort to buy time. It may help pave the way for more serious talks over the coming three months. Markets read this as a sign that progress is possible. Not guaranteed, and not permanent, but at least it’s a step forward.”

The Euro has been trading above levels that would be justified by interest rate differentials.

ING commented; “Should Bessent feed markets with convincing headlines on US-China talks today, a decisive break lower looks on the cards. The pair is trading 3% off its 21 April peak, but remains around 3% overvalued according to our short-term fair value model.”

ING added; “While it’s clear that spread is not the main driving force in current FX trading, further material de-escalations in trade wars and signs of resilience among US consumers despite tariffs can compress that risk premium further.”

There will be concerns that the US will take a hard-line stance against the EU which could hurt the Euro.

Rabobank head of FX strategy Jane Foley commented; there is a lot more optimism that the tariffs won’t have the devastating impact that perhaps they could have done, and there is a collective sigh of relief in markets.”

She was still cautious over the overall outlook; "That doesn’t mean that we’re back to where we were before the Trump inauguration, the 10% baseline tariff still exists everywhere, the 90-day pause is there and the clock is starting to tick. The overall scenario is not as bad as it could have been, but we still have a fair amount of uncertainty about where these tariffs will settle, their impact on world growth and central bank policy."


There will still be concerns over a longer-term loss of confidence in US assets.

US-China trade headlines have dominated on Monday, but the Ukraine situation will also be monitored with the possibility of bilateral talks between Russia and Ukraine this week.

ING added; “A breakthrough in peace negotiations will be beneficial for EUR/USD, but the extent of the impact will be highly dependent on the market’s assessment of the sustainability of any truce. There is a tangible chance markets will lean on the cautious side here.”

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TAGS: Euro Dollar Forecasts