According to Trump’s statement, the market loves his tariffs. The global economy’s robust performance, as evidenced by an uptick in GDP, further validates his perspective. However, the situation contradicts the prevailing theory. What is the rationale behind this shift? Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- Global GDP grew by 2.4% in the first half of the year.
- China is redirecting US imports.
- The second half of the year will be different from the first.
- A break above 1.1715 is a signal to increase long trades on the EURUSD pair.
Weekly US Dollar Fundamental Forecast
The EURUSD exchange rate has exhibited a rally. Some find it favorable, but others find it unappealing. The euro’s 13% appreciation since the beginning of the year will be one of the topics discussed at the ECB’s July meeting. The European Central Bank has signaled its readiness to halt the process of monetary policy easing. However, the sustained rally of the major currency pair, coupled with the escalating tariff tensions, could decelerate inflation in the eurozone and revive the monetary expansion cycle.
Forecasts for ECB Deposit Rate Trajectory
Source: Bloomberg.
In late 2024, a rally in the EURUSD pair was not a popular prediction. The euro is often regarded as a symbol of optimism, while the United States’ administration’s protectionist policies are intended to temper international trade and global economic growth at least in theory. In practice, it is essential to consider time as a variable. Due to the tariff delays, the intended outcome has been counterproductive. The implementation of US tariffs has boosted global GDP.
According to JP Morgan, the global economy expanded by 2.4% in the first half of the year. International trade volume surged by 5.3% during the January–March period. The WTO revised its forecast for global trade in goods in 2025, increasing its projection from -0.2% to +0.1%. The actual GDP data for the countries that were expected to be most adversely affected by US tariffs is encouraging.
Global GDP in Last 13 Weeks
Source: Wall Street Journal.
The main reason behind this trend lies in the front-loading of US imports and in the redirection of supplies. Between January and May, China’s exports to the United States decreased by 10%, while their total value increased by 6%. During the same period, US imports from Asia increased by 10% to reach $582 billion. It is evident that goods from China continue to reach the US, albeit via an alternative route.
Washington has also acknowledged this shift. It has imposed a 40% tariff on imports from Vietnam of goods that are not produced domestically. This will present a significant challenge for China and the global economy. This is particularly relevant given the imminent arrival of August 1. According to certain sources, the day is referred to as “Zombie Liberation Day.” In contrast to the impact of the US Liberation Day, this event will have a negative effect on international trade and global GDP.
The latter half of the year may differ significantly from the first half. The previously anticipated apocalypse has not been canceled but has been rescheduled. This poses a significant challenge for a currency as optimistic as the euro. Today, it is challenging to speculate on the outcome in advance. The future of the EURUSD pair remains uncertain, as the implications of the Zombie Liberation Day are not yet known. However, in a negative scenario, it will be necessary to consider selling the pair on the rise.
Weekly EURUSD Trading Plan
Meanwhile, the euro is showing signs of recovery due to a number of factors, including waning confidence in the US dollar, expectations of a pause by the ECB, and the imminent resumption of the Fed’s monetary expansion cycle. A breakout of the resistance level of 1.1715 will allow traders to increase long trades on the EURUSD pair formed at 1.164. However, given the current economic climate, the potential for a rally in the major currency pair is becoming more limited.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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