Synopsis:
Goldman Sachs expects renewed downside pressure on the Euro as looming US tariff risks come into sharper focus ahead of the April 2nd announcement. While some short-term relief may come from a long implementation period, the Eurozone’s trade-sensitive economy and limited near-term fiscal catalysts make the EUR vulnerable. Goldman forecasts a ~7pp increase in the effective US tariff rate, with risks skewed higher, potentially pressuring EUR/USD through Q2.
Key Points:
1️⃣ April 2nd Tariff Announcement to Drive FX Narrative 📆📉
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Treasury Secretary Bessent confirms a single "reciprocal" tariff number to be unveiled April 2nd.
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Countries expected to negotiate down from this baseline, adding bilateral uncertainty.
2️⃣ Goldman Sees ~7pp Rise in Effective US Tariff Rate 📊
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Adds to ~3pp already in place.
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Doesn’t fully account for VAT or FX-related non-tariff barriers, so risks skewed toward more aggressive action.
3️⃣ Eurozone Vulnerable Due to Trade Sensitivity & Delayed Fiscal Impact 🇪🇺
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Trade-heavy EU economy is more exposed to tariff impacts than the US.
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Back-loaded fiscal support and a potential lull in new policy drivers weaken EUR’s defense.
4️⃣ PMIs May Offer Brief Optimism, But EUR Likely to Struggle 💶
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Next week’s PMIs could provide short-lived relief if they show early signs of a recovery.
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But structural trade risks are likely to dominate, weighing on EUR in coming weeks.
Conclusion:
Goldman Sachs warns that April “showers” may hit the Euro, as tariff risks rise sharply into the April 2nd announcement. Even if markets initially look past implementation delays, the Eurozone’s exposure to global trade and absence of near-term fiscal momentum make EUR/USD vulnerable to a renewed slide, especially if tariff escalation continues into Q2.
