US Dollar Weakens After Trump-Musk Bromance Over. Forecast as of 06.06.2025
The US president and Tesla’s CEO had an unexpected quarrel. Elon Musk characterized the tariffs as unwise and expressed his support for Congress’s consideration of impeaching the head of state. However, the EURUSD pair was influenced by other events. Let’s discuss this topic and develop a trading plan.
The article covers the following subjects:
Major Takeaways
- The ECB has cut rates for the eighth time.
- The EU regulator believes that the easing cycle has come to an end.
- Elon Musk has clashed with Donald Trump.
- Long trades on the EURUSD pair can be opened with targets at 1.16 and 1.2 amid sluggish employment data.
Weekly US Dollar Fundamental Forecast
For a moment, financial markets revisited the era when monetary policy was the primary driver on Forex. The approaching end of the ECB’s monetary expansion cycle has driven the EURUSD pair towards 1.15 in the short term. Meanwhile, Elon Musk’s remarks led to a significant decline in stock indices. The Tesla CEO has expressed strong opposition to President Trump’s policies, urging Congress to reject the substantial tax cuts and consider impeachment.
People often interpret information in ways that align with their preconceived notions and biases. The US administration has urged the Fed to lower interest rates, observing that Europe has already done so nine times. By that point, the ECB had already implemented seven acts of monetary expansion. On June 5, the eighth rate cut took place. The deposit rate was reduced to 2%. According to Bloomberg, some members of the Governing Council believe that the cycle is over. The remaining members suggested a pause at least until September.
ECB Forecast for Inflation and GDP
Source: Bloomberg.
The EURUSD pair initially reacted with a decline due to the reduction of inflation forecasts to 1.6% in 2026. However, Christine Lagarde has suggested that these estimates may be subject to adjustment. According to the ECB head, monetary policy is on the right track. The policy does not appear to have any significant impact on the economy, either stimulatory or restraining. Subsequent to these remarks, the derivatives market began to question the European Central Bank’s intention to sustain the cycle in 2025. Against this backdrop, the euro strengthened.
In addition, a series of disappointing US economic data prompted the futures market to anticipate a reduction in the federal funds rate at two meetings before the end of the year. Following disappointing reports on the PMIs and private sector employment, the rise in jobless claims to their highest level since October was also discouraging.
Fed Monetary Policy Easing Expectations
Source: Bloomberg.
This situation draws parallels to events that transpired a month ago. At that time, investors were concerned about low employment growth in the private sector and rapid growth in unemployment claims. However, the April labor market report exceeded expectations. Today, the US economy is undergoing a period of cooling, though it is not yet experiencing a freeze. As a result, the Fed can proceed at its own pace, regardless of any public criticism from Donald Trump regarding Jerome Powell or his calls for the central bank to lower interest rates.
Weekly EURUSD Trading Plan
The pullback in the EURUSD pair was due to profit-taking on the ECB meeting outcome and reluctance to hasten action before the release of the US employment data for May. The Wall Street Journal projects growth of 125,000, which falls below the three-month average of 155,000. If the job market posts sluggish figures, it may present an opportunity to increase long trades on the euro with the targets at 1.16 and 1.2. On the contrary, robust employment statistics will force the major currency pair to retreat.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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