Euro drops as Trump threatens 50% tariff on EU

Forex

Economic

Summary:

The euro fell after Trump threatened 50% tariffs on the EU starting June 1, reigniting trade fears. Markets shifted focus from U.S. debt to tariffs, pressuring the dollar and boosting safe-haven currencies.

The euro fell on Friday, reversing earlier gains after U.S. President Donald Trump said he would recommend hitting the European Union with 50% tariffs from June 1, reigniting investor fears over the impact of duties on the world economy and trade.

In a post on his Truth Social platform, Trump said the EU was "very difficult to deal with" and "our negotiations with them are going nowhere."

"Therefore, I am recommending a straight 50% Tariff on the European Union, starting on June 1, 2025. There is no Tariff if the product is built or manufactured in the United States."

The euro had risen by almost 0.8% on the day earlier, after Trump in a separate post threatened to impose a 25% tariff on Apple (AAPL.O) , opens new tab on all iPhones not made in the United States. It was last up 0.45% at $1.1336.

The dollar pared some losses against the Japanese yen and the pound after Trump's post on EU tariffs, but was still heading for its first weekly drop against a basket of currencies in five weeks.

After Moody's last week downgraded its U.S. debt ratings, investor attention this week has honed in on the country's $36 trillion debt pile and Trump's tax bill, which could add trillions of dollars more to it.

Dubbed by Trump as a "big, beautiful bill", it narrowly passed the Republican-controlled U.S. House of Representatives and now heads to the Senate for what is likely to be weeks of debate, keeping investor sentiment fragile in the near term.

After the U.S. and China agreed earlier this month to suspend their reciprocal tariffs, investor focus has returned to vulnerabilities in U.S. government finances.

Trump's posts on Friday brought tariffs and trade roaring back to the fore.

"The focus had very much been on the U.S. fiscal position following the passage of Trump's 'big beautiful bill'. But this has swung attention firmly back to trade tariffs. It's more bad news for the U.S. dollar, bringing 2025 lows into focus. I think it does nothing to help avert the 'sell America'," City Index strategist Fiona Cincotta said.

The yen , which has served as a safe haven for investors seeking alternatives to the dollar, strengthened, leaving the dollar down nearly 1% at 142.52.

The Japanese currency got a boost earlier from data showing Japan's core inflation accelerated at its fastest annual pace in more than two years in April, raising the odds of another interest rate hike by year-end.

The data underscores the quandary facing the Bank of Japan, which must grapple with price pressures from persistent food inflation as well as economic headwinds from Trump's tariffs.

Super-long Japanese government bonds have also scaled record highs this week, although they were steady on Friday.

The Swiss franc also rallied, pushing the dollar down 0.7% to 0.8225 francs.

source : reuters

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Warren Takunda

Economic

China–U.S. Trade War

Donald Trump has said he will impose a 50% tariff on all EU imports to the US from 1 June after saying trade talks between the two trading blocs were “going nowhere”.

In a surprise announcement, the US president posted on his Truth Social platform that his long-running battle to secure concessions from the EU had run aground.

He accused the EU of taking advantage of the US on trade, saying: “Our discussions with them are going nowhere! Therefore I am recommending a straight 50% Tariff on the European Union, starting on 1 June 2025.”

Stock markets slumped in response to the post, with S&P 500 futures down by 1.5% before the New York market opening. The STOXX Europe 600 index fell by 1.7%.

The US imposed a 20% “reciprocal” rate on most EU goods on 2 April, but halved that rate a week later until 8 July to allow time for talks. It has retained 25% import taxes on steel, aluminium and vehicle parts and is threatening similar action on pharmaceuticals, semiconductors and other goods.

“This is a major escalation of trade tensions,” said Holger Schmieding, the chief economist at Berenberg, on Friday. “With Trump you never know but this would be a major escalation. The EU would have to react and it is something that would really hurt the US and European economy.”

EU negotiators have been locked in meetings with White House representatives since Trump’s “liberation day” tariffs were first announced. Dozens of nations have been holding discussions to try to bring down their own levies before the 90-day pause elapses.

The White House has relented on many of its most onerous tariffs, including lowering total tariffs on Chinese goods from 145% to 30% after what Trump declared were constructive talks with Beijing, which lowered its retaliatory border taxes from 125% to 10% in response.

A week ago the US president appeared to acknowledge that Washington lacked the ability to negotiate deals with scores of countries at once, saying the US would instead send letters to some trading partners to unilaterally impose new tariff rates.

Perceptions of an easing back on a hardline approach to trade brought a period of calm to stock markets, but Friday’s threat of a 50% levy on EU goods, plus a separate threat made the same day of 25% tariffs on iPhones made abroad, have brought an end to the peace.

The EU presented a fresh trade proposal to the US on Thursday. The offer included phased tariff cuts on non-sensitive goods, plus cooperation on energy, AI and digital infrastructure. The bloc was readying about $108bn in retaliatory tariffs if talks fail.

To sweeten the deal, EU officials were also willing to extend a 2020 tariff-free arrangement on US lobster imports, according to the Financial Times. But it appears to have proved insufficient to persuade the US president to sign a deal allowing only his 10% universal tariff to apply to the EU, as it does the UK.

Source: Theguardian

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Adam

Commodity

Crude Oil Prices Stall as OPEC+ Supply Expectations Weigh on Market

Daily Light Crude Oil Futures

Light crude oil futures are holding near-flat levels Friday, as traders attempt to halt a three-day slide that has erased recent gains. After rejecting key technical resistance at $62.59 and its 50-day moving average at $62.80, the market appears poised to test the short-term pivot at $59.51—a level that could determine the next directional move.

Can the $59.51 Pivot Hold in the Face of Bearish Pressure?

A bounce from $59.51 could form a secondary higher bottom, giving bulls a potential setup to retest the 50-day average. However, if this support fails, technical selling could intensify, targeting a deeper support zone between $54.83 and $54.01. The price action suggests traders are hesitating as they weigh technical signals against bearish fundamental drivers.

OPEC+ Output Hike Looms Large Over Oil Prices Forecast

This week’s losses, with both Brent and WTI down roughly 2%, are largely tied to growing expectations that OPEC+ will raise output again in July. Market participants anticipate an increase of 411,000 barrels per day, continuing the group’s gradual unwind of 2.2 million bpd in voluntary production cuts. These increases have already added 1 million bpd in combined capacity between April and June.

Analysts note that even geopolitical risks, including reports of Israeli planning for a potential strike on Iranian nuclear sites and fresh EU and UK sanctions on Russian oil flows, have failed to counter the supply-driven sentiment. SEB’s Bjarne Schieldrop said, “Brent is down in response to expectations of OPEC+ expanding its production quota.”

U.S. Crude Stockpiles and Storage Demand Compound Bearish Outlook

Adding to downside pressure, U.S. crude inventories showed a significant build this week, suggesting demand is lagging behind supply growth. The surge in U.S. crude storage demand—now approaching pandemic-era levels—highlights market concerns about oversupply in the near term.

Further supply-side insights are expected from Friday’s Baker Hughes rig count, a key indicator of U.S. production capacity. Traders are also watching developments in U.S.-Iran nuclear negotiations, as a breakthrough could unleash more Iranian barrels into the global market.

Bearish Outlook Firm as Supply Narrative Dominates

With technical resistance intact and multiple fundamental drivers pointing to rising global supply, the oil market remains tilted to the downside. Unless the $59.51 support level holds and catalyzes a shift in sentiment, the path of least resistance appears bearish in the near term.

Source : fxempire

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Glendon

Political

Israeli airstrikes killed at least six Palestinians guarding aid trucks against looters, Hamas officials said on Friday, underlining the problems hindering supplies from reaching hungry people in Gaza following Israel's 11-week-long blockade.

The Israeli military said 107 trucks carrying flour and other foodstuffs as well as medical supplies entered the Gaza Strip from the Kerem Shalom crossing point on Thursday. But getting the supplies to people sheltering in tents and other makeshift accommodation has been fitful.

So far, an umbrella network of Palestinian aid groups said, 119 aid trucks have entered Gaza since Israel eased its blockade on Monday in the face of an international outcry. But distribution has been hampered by looting by groups of men, some of them armed, near the city of Khan Younis, the network said.

"They stole food meant for children and families suffering from severe hunger," the network said in a statement, which also condemned Israeli airstrikes on security teams protecting the trucks.

A Hamas official said six members of a security team tasked with guarding the shipments were killed. There was no immediate comment from the Israeli military.

The aid groups network also said the amount of aid coming into Gaza was still inadequate and only included a narrow range of supplies. It said Israel's agreement to allow trucks to enter the war-shattered enclave was a "deceptive manoeuvre" to avoid international pressure calling for the lifting of the blockade.

So far, Israel says it has allowed around 300 trucks to enter Gaza but aid groups say many of the trucks have been held up at the Kerem Shalom crossing and not yet reached people in need.

The Israeli military said it had conducted more strikes in Gaza overnight, hitting 75 targets, including weapons storage facilities and rocket launchers. Palestinian medical services said at least 25 people had been killed in the strikes.

Israel imposed its blockade on Gaza in early March, accusing Hamas of stealing aid intended for civilians, shortly before breaking a two-month-old ceasefire after the two sides deadlocked on terms for extending it.

Hamas has rejected the accusation and says many of its own fighters have been killed protecting the trucks from looters.

Israel launched an air and ground war in Gaza after Hamas militants' cross-border attack on October 7, 2023, which killed some 1,200 people by Israeli tallies and saw 251 hostages abducted into Gaza.

The Israeli campaign has since killed more than 53,600 Palestinians, according to Gaza health authorities, and devastated the coastal strip. Aid groups say signs of severe malnutrition are widespread.

Source: Reuters

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Warren Takunda

Commodity

Middle East Situation

Crude oil prices fell for a third consecutive trading day on Thursday ahead of the US-Iran nuclear talks. Traders are growing concerned about the possible return of oil supply from Iran, which holds around one-third of the world’s oil reserves.

Adding to the pressure, a Bloomberg report stated that the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) is considering a third consecutive production hike in July, compounding fears of an oversupplied market.

Oil prices continued to decline during Friday’s Asian session. As of 4:40 am CEST, Brent futures were down 0.59% to $64.06 per barrel, while West Texas Intermediate (WTI) futures fell 0.6% to $60.83 per barrel—both touching their lowest levels in over a week.

Potential oversupply overshadows geopolitical tensions

Crude prices have experienced notable volatility in recent weeks as market participants weigh rising geopolitical tensions against mounting supply from major oil-producing nations. Broader macroeconomic factors—such as easing US-China trade tensions and renewed selling in US Treasuries—have also been influencing oil market movements.

Earlier in the week, prices briefly spiked following a CNN report that Israel was preparing to launch strikes against Iran’s nuclear facilities, citing intelligence from US sources. However, the rally proved short-lived, with analysts suggesting the warning may have been a strategic move by the US to exert pressure on Iran ahead of the nuclear negotiations.

The geopolitical boost was quickly overshadowed on Wednesday by data showing a surge in US crude inventories. According to the Energy Information Administration (EIA), US oil stockpiles rose to 443.2 million barrels in the week ending 16 May—the highest level since July 2024. The report also indicated that net US crude imports had increased for a third consecutive week, while domestic demand remained weaker than expected.

OPEC+ may accelerate production hike

News about OPEC+’s potential acceleration in production hike sent the oil price down further on Thursday. The oil production cartel is reportedly considering hiking crude output by 411,000 barrels per day (bpd) in July. The decision is yet to be finalised on 1 June when the group holds the next meeting.

The group, which accounts for around 40% of global oil supply, has jointly reduced production by approximately 2.2 million bpd in 2023. The quicker-than-expected phased rollback began with a 135,000 bpd increase in April, tripling to 411,000 bpd in May and June. The acceleration is seen as a punitive measure against members which failed to comply with agreed production quotas, with Kazakhstan and Iraq identified as recent overproducers.

Crude prices have consistently fallen following OPEC+ announcements of larger-than-expected production increases in both April and May. However, the potential July decision may already be priced in by markets—unless the group surprises traders with an even more aggressive supply boost.

Demand outlook remains weak

The demand outlook remains fragile amid ongoing concerns over slowing global growth, particularly driven by the US tariffs. Crude prices had previously dropped to a four-year low on 9 April and again on 5 May. The oil market rebounded following the US and China’s trade talks earlier this month, when the world’s two largest economies reached an agreement to pause high tariffs on each other for 90 days.

While near-term pressure remains supply-driven, there is cautious optimism that a sustained recovery in market sentiment, driven by further progress in US tariff negotiations, could support a rebound in oil demand.

“While the immediate pressure comes from the supply side, I believe that in the longer term, further progress on US tariff negotiations with key partners could revive demand and offer more meaningful support for oil,” Dilin Wu, a research strategist at Pepperstone Australia, said.

Source: Euronews

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Adam

Economic

China–U.S. Trade War

U.S. stock index futures slid on Friday after President Donald Trump recommended 50% tariffs on the European Union, while Apple stock dropped after he warned that the company would have to pay tariffs if its phones were not made in the United States.

"The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with," Trump said in a post on Truth Social.

He also said in a separate post prior to this that Apple (AAPL.O), opens new tab would be subject to 25% tariffs if phones sold in the U.S. were not made within its borders. Apple's shares were down almost 4% in premarket trading.

At 08:08 a.m. ET, Dow E-minis were down 625 points, or 1.49%, S&P 500 E-minis were down 93.25 points, or 1.59%, and Nasdaq 100 E-minis were down 405 points, or 1.91%.

"The impact of tariffs for both sides on the surface is jolting... the market doesn't like uncertainty," said Andre Bakhos, managing member at Ingenium Analytics LLC.

"In the end, it will help the U.S. and other countries if we can get the EU at the table."

Other megacap and growth stocks turned sharply lower, with Amazon (AMZN.O), opens new tab and Nvidia (NVDA.O) , opens new tab sliding more than 2% each.

Wall Street's "fear gauge", the CBOE Volatility Index (.VIX) , opens new tab, spiked to a more than two-week high and was last at 24.6 points.

Risk sentiment had remained in check after the Republican-controlled U.S. House of Representatives passed the sweeping tax and spending bill that would enact much of Trump's policy agenda by a narrow margin on Thursday. The bill now heads to the Senate, which Republicans control 53-47, for approval.

If it becomes a law, it will add about $3.8 trillion to the federal government's $36.2 trillion debt in the next decade, according to the nonpartisan Congressional Budget Office.

Long-dated government bond yields eased on Friday, with those on the 10-year note off 9 basis points to 4.46%.

All three main stock indexes were set for modest weekly losses as worries about mounting debt pushed Treasury yields higher. Moody's downgrade of the U.S. credit rating late last week had initially sparked concerns.

Trading activity is expected to thin on Friday, heading into a long weekend, as markets will be shut on Monday for Memorial Day.

Source: Reuters

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Warren Takunda

Economic

U.S. futures and global markets slumped Friday after President Donald Trump posted a pair of tariff threats on social media, one aimed at Apple and the other at the European Union.

Futures for the S&P 500 and the Dow Jones Industrial Average slid 1.5% and Nasdaq futures tumbled 1.7% before the bell. Oil prices fell and Treasury yields sank.

Markets took a sharp turn downward after Trump posted on social media that he wants “a straight 50% Tariff” on the EU beginning June 1 because representatives of the bloc have been difficult in negotiations.

European markets fell nearly immediately after Trump’s post on his own Truth Social site. Germany’s DAX quickly swung to a 1.9% loss, while the CAC 40 in Paris fell 2.4%. London’s FTSE 100 shed 1.1%.

Trump has dialed back or paused many of his tariff threats in recent weeks, bringing some peace to markets which had been swinging wildly in both directions for weeks as Trump fired off tariff threats.

Shares of Apple were down 3.8% in morning trading after Trump threatened to put a 25% tariff on Apple products unless the company moves its iPhone manufacturing to the United States.

The threat delivered over social media could dramatically increase the price of iPhones, potentially hurting sales and the profits of one of America’s leading technology companies.

Ross Stores tumbled 13% after it issued lower guidance than Wall Street was hoping for. The company, like many others have done recently, pulled its full-year guidance over broader economic uncertainty related to Trump’s tariffs.

Shoemaker Deckers Brands, the owner of Hoka and Ugg, slid 19%, even after the company posted record sales and profit that easily beat Wall Street expectations. Decker also pulled its full year guidance, specifically citing the uncertainty over U.S. trade policy.

U.S. Treasury yields tumbled after jumping earlier in the week over concerns about mounting U.S. government debt.

The yield on the 10-year Treasury fell to 4.48% while the two-year yield, which more closely tracks expectations for action by the Federal Reserve, slipped to 3.92%.

Treasury yields had spiked earlier in the week as details of the Republican-backed spending bill came out. The bill, passed overnight in the House of Representatives on Thursday, would cut taxes and could add trillions of dollars to the U.S. debt.

The House’s multitrillion-dollar spending bill, which aims to extend some $4.5 trillion in tax breaks from Trump’s first term while adding others, is expected to be amended when it gets to the Senate for a vote.

Oil prices tumbled for the fourth day in a row.

U.S. benchmark crude oil tumbled $1.07, or 1.3%, to $60.13 per barrel while Brent crude, the international standard, fell 99 cents to $63.45 per barrel.

In Asia, Tokyo’s Nikkei 225 gained 0.5% to 37,160.47 after the government reported a core inflation rate of 3.5% in April, the highest since early 2023. Core inflation excludes volatile food and energy prices.

The surge in prices has increased the likelihood that the Bank of Japan might raise its benchmark interest rate at its next policy meeting, analysts said.

But uncertainty over Trump’s tariff hikes will limit what the BOJ can do, given recent signs of weakness in the economy, Min Joo Kang of ING Economics said in a report.

He added that “with US tariffs likely to impact manufacturing and exports negatively throughout this year, the BOJ’s policy changes are likely to be gradual.”

Hong Kong’s Hang Seng picked up 0.2% to 23,601.26, while the Shanghai Composite Index lost 0.9% to 3,348.37.

Seoul’s Kospi retreated 0.1% to 2,592.09 and the S&P/ASX 200 in Australia gained 0.2% to 8,360.90.