EUR/USD Forecast: Trade Relief Boosts Euro on Dollar Fears

May 27, 2025 - Written by Frank Davies

STORY LINK EUR/USD Forecast: Trade Relief Boosts Euro on Dollar Fears

Just after the Asian open on Monday, President Trump executed another tariff-policy shift, reversing Friday’s threat to impose 50% tariffs on EU exports to the US from June 1st.

The Euro to Dollar (EUR/USD) exchange rate jumped to 4-week highs just below 1.1420 before settling just below 1.1400.

Scotiabank commented; “There is a little congestion on the daily chart between 1.1380/1.1420 which may slow gains in the short run ahead of a retest of the 1.16 area (and possibly higher, potentially towards the 1.18/1.20 range).”

Trump has backtracked on the June 1st threat with a concession that there would be a delay until July 9th.

This puts the EU back to the previous position with the reciprocal tariffs on most countries due to come in on July 9th following the 90-day delay from April 9th.

There would have been notable damage to the Euro-Zone economy if the June 1st tariffs had come into effect and the delay has, therefore, triggered a sense of relief.

There is still a major element of uncertainty over US tariff policy.


Barclays noted underlying uncertainty; "the US has not turned the page on tariffs and that more trade policy volatility lies ahead.”

National Australia Bank head of FX research Ray Attrill commented; "The 'Sell America' theme, which obviously was the dominant theme back in April, is back on show."

He added; "Markets have probably taken the view - and probably rightly so - that where we land eventually on a tariff situation between the U.S. 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 secured further net support from China’s pledge to provide more support for the domestic economy.

According to Premier Li Qiang, China is weighing new policy tools in the face of international economic and trade order that is “under severe impact.”

He added that China is studying new policy tools, including some "unconventional measures", which will be launched as the situation changes.

Unease surrounding fiscal policy direction has amplified dollar unease. After the House of Representatives approved the budget bill on Friday, there will be a tough battle in the Senate during June.


Rabobank commented; “While there is a wide variation of views about the US budget, growth and inflation outlooks, the heightening of risks surrounding all three has been clearly making the treasury market jittery. In turn, this is having negative repercussions for US stocks as well as the USD."

Pepperstone head of research Chris Weston commented; "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."

He added; "It is fast becoming a consensus view that the USD is on the path to a multi-year decline."

Standard Chartered does see scope for a short-term dollar recovery; “In the near term, renewed appetite for US assets and closing of earlier bearish positions should offer support for the USD.”

It considers that this could drive EUR/USD below 1.10.

The bank remains cautious over the longer-term outlook; “However, we expect this USD bounce to be temporary. Ongoing rotation out of US assets and elevated USD valuations are likely to lead to a modestly weaker USD in the longer term.”

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TAGS: Euro Dollar Forecasts