EUR/USD climbs above 1.1600 as Europe responds to Trump’s tariff threats

• EUR/USD edges higher toward the 1.1625 area in early European trading on Monday, as the euro finds support from signs that Europe is prepared to respond to U.S. tariff measures.
• The move follows President Donald Trump’s announcement of a 10% tariff on goods from several European countries, prompting pushback from European leaders.
• Meanwhile, expectations that the Federal Reserve will keep interest rates unchanged at its January meeting—amid a resilient labor market and still-elevated inflation—have weighed on the U.S. dollar, providing additional support for the pair.

The EUR/USD pair advances to around 1.1625 in early European trading on Monday, snapping a four-day losing streak. The U.S. dollar comes under modest pressure against the euro after President Donald Trump threatened to escalate tariffs on eight European nations opposing his proposal for the United States to acquire Greenland.

U.S. markets are closed on Monday in observance of Martin Luther King Jr. Day.

Over the weekend, Trump announced a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom, set to take effect on February 1. He added that the levy would rise to 25% in June unless an agreement is reached allowing the U.S. to purchase Greenland.

Europe is set to respond after President Donald Trump imposed additional tariffs on key allies, with European leaders expected to convene an emergency meeting in the coming days to consider potential retaliation. Renewed concerns over a trade war and the longer-term implications of Trump’s latest move have weighed on the U.S. dollar, providing support for the EUR/USD pair.

“While one could argue the tariffs are a threat to Europe, it is actually the dollar that is absorbing most of the impact, as markets appear to be pricing in a higher political risk premium for the U.S. currency,” said Khoon Goh, head of Asia research at ANZ.

That said, stronger-than-expected U.S. labor market data released last week have delayed expectations for further Federal Reserve rate cuts until June, which could help cap downside pressure on the dollar. According to the CME FedWatch tool, markets are pricing in nearly a 95% probability that the Federal Open Market Committee will leave rates unchanged at its January 27–28, 2026 meeting.

Sources: Investing