EBC Markets Briefing | Euro hunkers amid trade tensions

The euro fell to a three-week low on Monday while the Mexican peso also came under pressure. Trump threatened to impose a 30% tariff on imports from the two economies beginning August.

The EU had been seeking at least a preliminary agreement that would spare it from tariff hit, though the two sides are yet to manage differences in several key areas.

On top of it, the president said that it would be a great thing if Fed Chair Jerome Powell stepped down, again threatening to undermine the central bank's independence as he calls for interest rates to be lowered.

The hurdle for another interest rate cut by the ECB is "very high" as the economy is holding up better than expected despite uncertainty over trade, board member Isabel Schnabel said in an on Friday.

However, the figures had been inflated in Q1 by strong US front-loading effects with a significant boost to exports in pharm. The momentum is expected to dwindle in the current quarter.

European Commission President Ursula von der Leyen has lately accused China of distorting trade and limiting access for European firms two weeks ahead of a summit, which could be intended to appease Trump.

The single currency hit as low as 1.1660 before a rebound with risk tilted towards the downside given lower highs and lower lows. Therefore, it could retest the 1.1670 level.

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