Currency Markets React to New Tariff Threats by Trump

The euro dropped to a three-week low as President Trump threatened a 30% tariff on imports from Europe and Mexico starting August 1. This move, posted on his social media, was criticized by the EU and Mexico for being unfair. Market reactions were muted amid ongoing negotiations.

The euro dipped to a three-week low following President Donald Trump's announcement of a 30% tariff on imports from Europe and Mexico, starting August 1. This measure, revealed on his Truth Social platform, was denounced by both the European Union and Mexico as unfair and disruptive. Despite the criticism, market reactions were muted in the early Asian session, with the euro trading 0.15% lower at $1.1675, and the dollar posting gains against the Mexican peso.

Despite Trump's headline-grabbing tariff threats, U.S. stocks continued to climb to record highs, indicating investor desensitization to the ongoing trade drama. Taylor Nugent, a senior economist at National Australia Bank, remarked on the market's resilience or complacency, noting the complexity of pricing in evolving tariff negotiations, especially after the previous July 9 deadline passed without incident.

Beyond tariff tensions, Trump targeted Federal Reserve Chair Jerome Powell, suggesting his potential resignation and advocating for lower interest rates. Meanwhile, investors are closely watching upcoming U.S. inflation data and Chinese GDP figures, which may offer insights into future economic trends against a backdrop of U.S.-China trade tensions.

(With inputs from agencies.)