EUR/USD: Trump shakes the dollar's compass

The dollar was slowly regaining some momentum after the Easter holidays, as Sino-American trade tensions eased a notch, following remarks deemed reassuring by Scott Bessent, the American equivalent of our boss at the French Ministry of Finance. Mr. Bessent predicts a substantial reduction in the surcharges imposed on Beijing, describing the situation as "untenable."

This de-escalation remains to be confirmed in practice. The trade war theme is therefore unlikely to disappear from the news feeds of foreign exchange traders. Especially since the EU, despite suspending the application of surcharges for 90 days, remains "tested by this trade war."

"Despite the suspension of reciprocal tariffs, the average effective tariff rate in the United States is at its highest since 1901, at 28%, due in particular to the colossal tariffs imposed on Chinese products," calculates the Market Strategy team in OSTRUM AM's MyStratWeekly.

"Given the prohibitive tariffs between China and the United States, the EU risks facing a significant influx of highly competitive Chinese products. The EU has indicated that it will take measures to limit them. Beyond building partnerships with other countries, it is essential for the EU to strengthen the European single market, which is currently still subject to significant tariff barriers. These are estimated to be equivalent to tariffs of 45% on goods and 105% on services, according to the IMF."

Also noteworthy is the White House's backpedaling on its stance toward the Fed, with Trump finally confirming that there is no question of dismissing its head, Powell, whom he himself appointed.

As a reminder, Donald Trump attacked the head of the US central bank on Monday, calling him a "huge loser," while the ongoing tensions between the US president and Jerome Powell are already worrying the markets.

"There may be a SLOWDOWN in the economy unless 'Mr. Too Late,' a huge loser, cuts interest rates, NOW," Donald Trump wrote on his Truth Social network, in a transparent reference to the Fed chief.

Statistically, on Wednesday, the Richmond Fed's manufacturing index plunged to -12, further into negative territory, completely missing expectations. The very first PMI barometer estimates for the Eurozone are at contrasting levels: 48.9 for manufacturing (above the consensus), but symbolically below 50 for services, at 49.6. Remember that a score below 50 points represents a contraction in the sector in question.

"Germany's new fiscal policies, aimed at increasing defense and infrastructure spending, and the increase in military spending in several European countries, should, however, ultimately favor a recovery in the services sector," says Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.

Right now, the EUR/USD is trading at $1.1427.

KEY CHART ELEMENTS
The triangle consolidation of April 4-9 is now over, with the currency pair having violently broken out. The energy released is significant, but the ease with which the EURUSD shatters resistance suggests a continued upward movement. An accumulation zone between 1.1460 and 1.1674 has been identified, as well as an upside target of $1.1970.

MEDIUM-TERM FORECAST
Based on 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 $1.1250 and the resistance at $1.1460.