Euro Bounces Back Amid Auto Tariff Uncertainty

The euro rallied after dipping to a three-week low on Thursday, driven by U.S. President Donald Trump's announcement of a 25% tariff on imported cars and light trucks, set to begin next week. Despite fears of a trade war, the currency market largely shrugged off the news, focusing instead on shifts in automaker stocks.

The euro rose 0.3% to $1.078625 following its earlier drop to $1.0733. Meanwhile, the yen saw slight strength at 150.17 per dollar, while the Mexican peso weakened by 0.5% to 20.2054 against the U.S. dollar. The Canadian dollar remained stable, albeit weaker, at 1.4261 per U.S. dollar.

With the U.S. importing $474 billion in automotive products in 2024, including $220 billion in passenger cars, major suppliers such as Mexico, Japan, South Korea, Canada, and Germany are closely watching the implications of these tariffs. OCBC's Vasu Menon warned of potential ramifications for U.S. consumers, particularly amid existing inflationary fears. As investors anticipate reciprocal tariffs next week, the focus remains on how these developments might influence economic growth and inflation.