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EUR/USD falls on renewed trade tariff fears

• Trump considers +2.5% universal tariffs
• Tariff fears drive EUR more than the expected ECB rate cut
• EUR/USD falls towards 1.04

EUR/USD is heading lower towards 1.04 as the pair looses traction amid the USD strength at the start of the European session.

U.S. Treasury Secretary Scott Bessent said on Monday he is pushing for universal tariffs on imports to start at 2.5% and rise gradually. Trump said he wants to enact across the bord trade tariffs much larger than 2.5% but hasn't yet decided on the level.

Following Trump's comments, and renewed tariff fears, the balance of risk has shifted back to the downside for the euro.

The latest trade comments are more relevant for directing the EUR than the widely expected 25 basis point cut by the ECB on Thursday. The central bank is also expected to signal further rate cuts, but this is widely expected and, therefore, could have a limited impact on the market.

Attention will also be on the FOMC decision tomorrow, where the Fed is expected to leave rates unchanged. The US economy has been a Goldilocks state since the previous Fed meeting, which supports the argument for patience. However, slowing underlying inflation keeps the bias towards cuts down the line. A pause from the Fed also allows them to see what policies Trump implements.

US durable goods orders and consumer confidence will be released later today.
 

EUR/USD forecast – technical analysis

EUR/USD has recovered from 1.0177 low, rising above the falling trendline dating back to October and the 50 SMA before, running into resistance at 1.0530 and correcting lower.

Buyers will need to rise above 1.0530 to create a higher high and exceed the bullish recovery towards 1.06.

Support can be seen at 1.04 and 1.0330, the November low. Below here, 1.0777 comes back into play.

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FTSE rises, shrugging off the tech rout

• FTSE relatively unscathed due to a lack of tech stocks
• UK shop prices fell 0.7% in January
• Trump mixed messages on trade tariff  keep investors on edge
• FTSE consolidates above 8500

The FTSE recovered from modest losses yesterday but has broadly emerged unscathed from the tech rout, given the index's lack of tech stocks. There are signs of a cautious recovery in the broader market. Yesterday's sell-off appears to have been overdone. Nvidia is rising by 5%, while the Nasdaq trades are 0.3% higher.

The Nasdaq closed 3.4% lower, and Nvidia shed 16.9%, equating to $600 billion in value, on Monday after the Chinese start-up Deep Seek unveiled a cheaper, more efficient AI model, calling into question big tech's huge investment into AI infrastructure.

Retailers will be in focus after data showed prices in UK shops fell again in January, dropping 0.7% after a 1% fall in December. This shows that the disinflation process is still in play. However, food costs rose 0.5%, the fastest monthly pace since April last year.

Retailers and supermarkets are pushing higher, with Sainsbury and Tesco trading up 1.9% and 1.7% respectively.

Miners feature heavily on the looser board amid renewed trade tariff concerns. Trump’s talk of universal tariffs comes after Trump appeared to be taking a less hostile approach towards China trade tariffs last week. There are certainly mixed messages coming from Trump regarding trade tariffs, which keep the market on edge. Riot Tinto and Anglo American trade 0.5% lower.
 

FTSE forecast - technical analysis

The FTSE is consolidating above 8500. The price briefly spiked down to 8430 yesterday. The long lower wick on yesterday’s candle suggests that there was little selling demand at the lower levels, and the price returned to familiar levels.  The RSI is above 50 and pointing higher which keeps buyers hopeful of a break to the upside.

Buyers will look to rise above 8590 to rise to fresh all-time highs.

Support is at 8580, the May high. A break below here opens the door to 8400.

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