EUR/USD Drops As USD’s Appeal Strengthens On Deepseek Concerns
EUR/USD fell near 1.0420 during the North American session on Tuesday. The major currency pair weakened as the US Dollar (USD) strengthened amid a global sell-off in technology, power and data center stocks, which has boosted its appeal as a safe-haven asset. The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, jumped near 108.00.
Investors dumped technology stocks as China’s DeepSeek’s low-cost Artificial Intelligence (AI) models have challenged the dominance of current AI players and their related entities worldwide.
Meanwhile, deepening uncertainty over US President Trump’s universal tariff plan and the Federal Reserve’s (Fed) monetary policy announcement on Wednesday have also strengthened the US Dollar. Soon after being elected as US Treasury Secretary, Scott Bessent proposed a universal tariff plan of 2.5%, which would increase gradually each month until it reaches Trump’s guidance of 20%.
Market experts believe that the gradual implementation of tariffs will give the US more time to negotiate harder and close better deals with its trading partners.
On the monetary policy front, the Fed is almost certain to leave interest rates unchanged in the range of 4.25%-4.50%. Therefore, investors will mainly focus on Fed Chairman Jerome Powell’s press conference after the policy decision for new interest rate guidance. Analysts at Macquarie expect Powell to offer little in this regard other than emphasizing the “data dependence of future decisions” while highlighting “uncertainty about the neutral interest rate”.
In Tuesday’s session, Durable Goods Orders unexpectedly contracted in December. The US Census Bureau reported that Durable Goods Orders fell at a faster pace of 2.2%, compared to 2% in November, revised down from 1.1%. Economists had expected new orders for Durable Goods to grow by 0.8%.
Source: FXStreet
