EUR/USD falls to near 1.1700 as US to raise tariffs on EU vehicles
By Akhtar Faruqui
Updated: 4 May 2026
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EUR/USD depreciates after opening at the bullish gap, remaining in the positive territory and trading around 1.1720 during the Asian hours on Monday.
- EUR/USD falls as Trump signals US tariffs on EU cars and trucks rising to 25% from 15%.
- US Dollar trims daily losses as risk aversion rises on escalating Middle East tensions.
- Trump plans escorting ships via Strait of Hormuz; Ebrahim Azizi warns US role violates ceasefire.
EUR/USD depreciates after opening at the bullish gap, remaining in the positive territory and trading around 1.1720 during the Asian hours on Monday. The pair declined as the Euro (EUR) faces challenges, which could be attributed to the recent comments from President Donald Trump, indicating the US will raise tariffs on European Union (EU) cars and trucks to 25% from 15% this week, citing alleged breaches of a trade deal.
Trump said in a social media post, warning EU-made vehicles would face higher duties unless production shifts to US plants, aiming to push carmakers to localize output. The European Commission rejected the claim, saying it is complying with last summer’s agreement and vowing to defend EU interests if Washington violates the deal.
The EUR/USD pair also loses ground as the US Dollar (USD) pares its daily losses amid increased risk aversion driven by escalating tensions in the Middle East. Bloomberg reported on Sunday that Donald Trump said the United States will begin guiding some neutral ships trapped in the Persian Gulf out through the Strait of Hormuz starting Monday.
Ebrahim Azizi, a former commander in Iran’s Islamic Revolutionary Guards Corps (IRGC) and current head of the parliamentary National Security and Foreign Policy Committee, said that any US interference in the new maritime regime of the Strait of Hormuz would be considered a violation of the ceasefire. He added that the Strait of Hormuz and the Persian Gulf are not a place for rhetoric.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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