EUR/USD adds to initial gains and breaches 1.09 – Danske Bank

EUR/USD seesawed on yesterday's tariff announcement, initially rallying above 1.09 on the relatively benign 10% flat tariff applied to all US trading partners, declining on the more aggressive reciprocal tariff measures, and then moving back above 1.09 again, Danske Bank's FX analyst Stefan Mellin reports.

EUR/USD is bullish on the day

"While tariffs, in isolation, are USD-positive through higher net exports and increased foreign investment, we highlight that US recession fears counterbalance this effect. This also explains the relatively modest reaction in EUR/USD, despite larger moves in other markets."

"Overall, we make no changes to our EUR/USD call - we expect consolidation around current levels in the near term, with risks tilted to the upside. Looking ahead, the focus shifts to tomorrow's US jobs report. While US growth concerns have intensified, driven by weak soft data and underperforming US equity markets, we have yet to see significant weakness in hard data."

"US recession fears could continue to drive price action alongside tariff developments, making the USD more sensitive to a weaker jobs report. We forecast nonfarm payrolls at 110k - below the 140k consensus - and if this materializes, we expect a higher EUR/USD and lower US rates."