Euro vaults to one-month high after Trump U-turn on EU tariffs
The euro hit a one-month high against the dollar on Monday, after U.S. President Donald Trump backed down from threatened 50% duties on European Union shipments from June 1, after the bloc asked for time to "reach a good deal."
The dollar continued its decline against a broad swathe of other currencies as Trump's policy reversals, as well as his sweeping spending and tax-cut bill currently in legislation, turned investors off from U.S. assets.
"The 'Sell America' theme, which obviously was the dominant theme back in April, is back on show," said Ray Attrill, head of FX research at National Australia Bank.
"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 climbed as much as 0.55% to reach $1.1418 for the first time since April 29. It was last up 0.36% on the day at $1.1394, bringing gains for the year so far to 10%.
Sterling rose by 0.39% to its highest level since February 2022 and was last up 0.25% on the day at $1.3574.
The safe-haven yen and Swiss franc were overall weak as market sentiment improved, but they still appreciated against the U.S. dollar.
The greenback slipped as much as 0.24% to 142.23 yen , the lowest level this month, and edged to a 2-1/2-week low of 0.8193 franc.
The U.S. dollar index, which tracks the currency against six other currencies, sank 0.15% to 98.93, extending last week's 1.9% decline.
Trump announced the decision to put off EU tariffs until July 9 on Sunday, following a call with European Commission President Ursula von der Leyen, who asked for more time to reach an agreement. July 9 is the end of the 90-day pause on Trump's April 2 "Liberation Day" levies on the EU and most other trade partners.
The de-escalation, just two days after Trump issued the threat, is a stark reminder of how suddenly U.S. trade policy can turn, even as it encouraged investors that deals can be struck and calmed worries about a global downturn.
"Following Trump's latest U-turn, we will, of course, have to wait and see what happens next. It is possible that a deal with the European Union will be reached by 9 July," Commerzbank currency strategist Michael Pfister said.
"However, it is questionable what has changed in terms of the fundamental problems following a phone call. One thing should be clear after Friday's announcement: the brief respite from tariffs that we enjoyed was only temporary," he said.
In a possible nod to fiscal worries among investors, Trump also said on Sunday that his sweeping spending and tax cut bill is likely to see "significant" changes in the Senate.
The House of Representatives' version of the tax bill is calculated to add about $3.8 trillion to the federal government's $36.2 trillion in debt over the next decade, according to the Congressional Budget Office.
"What seems clear from the reconciliation bill ... is that Trump and (Treasury Secretary Scott) Bessent have shifted tactics, swiveling hard from fiscal conservatism and reduced spending to an outright pro-growth policy stance," said Chris Weston, head of research at Pepperstone.
"It is fast becoming a consensus view that the USD is on the path to a multi-year decline."
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