EUR/USD remains below 1.0950, hopes of German fiscal deal may help limit losses

In early Asian trading on Tuesday, EUR/USD fell slightly around 1.0915. The escalation of the trade war with U.S. President Donald Trump imposing further tariffs on EU goods has put pressure on the euro (EUR). However, a weaker U.S. dollar (USD) could limit downside for the major currency pair amid concerns over a slowing U.S. economy and hopes for a German fiscal deal.

The United States has imposed tariffs on steel and aluminum, the European Union has drawn up plans to retaliate, and Trump has vowed to impose retaliatory tariffs of 200% on European wine and spirits. Any signs of an escalation in the tariff war between the United States and the European Union could put some selling pressure on the euro.

On the other hand, the downside for EUR/USD may be limited due to the Green Party's signaling on the German debt restructuring deal. German Chancellor-designate Friedrich Metz has agreed to a 500 billion euro infrastructure fund and major changes to borrowing rules or a relaxation of the so-called "debt brake." That should ensure the package is approved by Germany's lower house of parliament on Tuesday and passed by the upper house on Friday. This in turn could boost the euro against the U.S. dollar (USD) in the short term.

In addition, weaker-than-expected U.S. retail sales data heightened concerns about a slowdown in consumer spending. The report is likely to put pressure on the U.S. dollar and provide support for the major currency pair. The U.S. Census Bureau reported on Monday that retail sales rose 0.2% month-over-month in February, after falling 1.2% in January (revised from -0.9%). The figure was lower than market expectations for a 0.7% increase. On a yearly basis, retail sales rose 3.1% compared to 3.9% previously (revised from 4.2%).