EUR/USD: Trump is shaping world commerce...with a chainsaw

The euro was entering a phase of consolidation, a legitimate one given its recent gains since March 3rd, a move catalysed by growing concerns about a possible turning point in the US economy, the world's most powerful. The various inflation reports, eagerly awaited under these conditions, came out at rather reassuring levels this week, both for producer and consumer prices. This is hardly enough to dispel price concerns for the coming months, as rising tensions in the Trump-led trade war are making price dynamics less clear. This is much to the chagrin of the Fed, which is holding its Monetary Policy Committee meeting next week.

"Inflation is gradually declining. However, the uncertainty shock caused by the Trump administration's erratic economic announcements is considerably complicating the Federal Reserve's task," notes Paolo Zanghieri, Senior Economist at Generali Investments. "As Fed Chairman Jerome Powell emphasized last week, the healthy economy allows the central bank to hold off on a rate cut until political uncertainty has partially dissipated. This should be the key message from the March meeting. We anticipate little change in the FOMC's current stance, which still forecasts two rate cuts this year and two more in 2026."

This health of the world's largest economy is certainly "good," but questions about a possible turning point are becoming increasingly intense, especially since a very disappointing series of statistics on consumer sentiment and consumption itself. It should be remembered that consumption is structurally the main driver of national wealth creation across the Atlantic. Under these conditions, traders will be closely monitoring the preliminary consumer confidence data (U-Mich) at 16:00 (EU time), following last month's disappointment.

In the latest development in what can only be called a trade war, Donald Trump has threatened to impose tariffs on spirits imports by up to 200%. On his social network, Truth Social, the White House tenant referred to the "nasty 50% tariffs on whiskeys" imposed by the European Union.

Recall that in response to the 25% tariffs imposed by the US on steel and aluminum imports from around the world, the European Union, China, and Canada have announced retaliatory measures. Donald Trump himself indicated that he would retaliate by imposing tariffs that could "be a little more than reciprocal" on 4 April.

Right now, the EUR/USD is trading at $1.0894.

KEY GRAPHIC ELEMENTS
The break above $1.0608 amid significant volatility is a game-changer for the currency pair's configuration. The pair has just validated a resumption of support on the long-term 50-day moving average (in orange), initiating a resource pattern. The scenario of a rapid decline towards perfect parity (?1 = $1) is invalidated.

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our medium-term view on the EUR/USD exchange rate is neutral.

We will maintain this neutral view as long as the EUR/USD exchange rate is positioned between the support at $1.0758 and the resistance at $1.1012.