**EUR/USD Slides Below 1.1700 as Tariff Fears Propel Dollar to Two-Week High**
*Inspired by the original FXStreet article by Osman Gulseven*
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The EUR/USD currency pair has experienced significant downward pressure, recently breaking below the important 1.1700 threshold. This movement follows an escalation in trade-related tensions between the United States and its global partners, most notably the European Union and China. Currency markets have responded with heightened volatility, as traders seek out safe-haven assets and reprice global growth expectations. The U.S. Dollar Index (DXY) rallied to a two-week high, underlining the greenback’s role as a preferred refuge in uncertain times.
This article provides a detailed analysis of the underlying drivers behind the recent EUR/USD weakness, explores the impact of trade war fears, reviews reactions from key stakeholders, and offers insight into the technical and fundamental landscape shaping the forex market.
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### 1. Trade Tensions Escalate, Fueling Dollar Strength
– **Announcement of New Tariff Threats:**
The main catalyst for the sell-off in EUR/USD has been renewed trade threats from the United States. President Trump signaled his administration’s readiness to impose additional tariffs on $200 billion worth of Chinese imports. Furthermore, he referenced the possibility of tariffs on automobile imports from the European Union.
– **Market Sentiment Shifts to Risk-Off:**
Investors became increasingly cautious, seeking refuge in the U.S. dollar amid the prospect of escalating trade disputes. The dollar has benefitted from its status as the world’s primary reserve currency, perceived stability, and the relative strength of the U.S. economy.
– **Global Stock Markets Retreat:**
– European indices: DAX and CAC 40 both saw declines of over 1% on the day.
– Asian stocks: The Shanghai Composite Index dropped over 2%, reflecting China’s vulnerability to U.S. tariffs.
– U.S. equities: Wall Street opened lower as trade tensions clouded earnings optimism.
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### 2. Euro Faces Additional Headwinds
– **Weaker Eurozone Data:**
– Recent releases, including euro area industrial production and inflation numbers, have undershot expectations.
– The ZEW Economic Sentiment Index, a leading measure of German business morale, slumped to its lowest level since 2012, underscoring ongoing doubts about the recovery’s momentum.
– **European Central Bank’s Dovish Stance:**
– ECB President Mario Draghi reiterated the bank’s intention to maintain ultra-loose monetary policy, emphasizing that interest rates would remain unchanged “at least through the summer of 2019.”
– This stance contrasts with the U.S. Federal Reserve, which is widely expected to continue normalizing policy. Markets are pricing in at least two more rate hikes from the Fed before year-end.
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### 3. Dollar Index Surges, Further Pressuring EUR/USD
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