The euro edged up, returning to 1.0840 last Friday, supported by general dollar weakness and the intensifying trade war. The Trump administration announced the imposition of 25% tariffs on "all cars not made in the U.S.", effective April 2, and threatened to impose "much higher" tariffs on the EU and Canada if they coordinated their efforts to counter U.S. trade measures.
In response, the European Union is expected to retaliate with its own tariffs as early as next week. The President of the European Commission has pledged to protect EU workers, businesses and consumers while pursuing a negotiated solution. These tariffs are likely to hit the European economy hard, especially Germany. Almost a quarter of EU vehicle exports go to the USA, which is also Germany's main export market for automobiles.
On the monetary front, the ECB lowered borrowing costs by 25 basis points in March last Thursday, as expected. ECB official Cipollone suggested that the case for a further rate cut is strengthening.