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• EUR/USD struggles due to rising dovish sentiment surrounding the ECB’s policy outlook.
• The US Dollar appreciates following news that President Trump intends to direct federal agencies to review tariff policies.
• Traders expect the Fed to keep its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting.

EUR/USD remains in the negative territory after trimming its recent losses, trading around 1.0380 during the Asian hours on Tuesday. The Euro (EUR) remains under pressure as dovish expectations for the European Central Bank (ECB) continue to dominate. Markets are anticipating a 25 basis point (bps) rate cut at each of the next four ECB policy meetings, driven by concerns over the Eurozone’s economic outlook and the belief that inflationary pressures will remain subdued.

These dovish bets have intensified due to rising confidence that Eurozone inflation will sustainably return to the ECB’s 2% target, coupled with heightened uncertainty surrounding potential tariff policies from the United States (US).

The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, rises to around 108.30 at the time of writing. The Greenback regained ground after recent losses in the previous session, supported by news that President Donald Trump intends to direct federal agencies to review tariff policies and evaluate the United States' trade relationships with Canada, Mexico, and China.

However, the Greenback faced headwinds following a Bloomberg report indicating that President Donald Trump will not immediately announce new tariffs after his inauguration on Monday. The US Federal Reserve (Fed) is expected to keep its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting. However, investors believe Trump’s policies could drive inflationary pressures, potentially limiting the Fed to just one more rate cut.

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