EUR/USD slumps to 1.0200 neighborhood, multi-week low on Trump’s trade tariffs

• EUR/USD kicks off the new week on a bearish note amid resurgent USD demand. 
• Trump imposed tariffs on Canada, Mexico, and China, boosting the safe-haven buck.
• The divergent ECB-Fed outlook also contributes to the downfall and favors bears.

The EUR/USD pair attracts heavy follow-through selling on Monday and dives to the 1.0200 neighborhood, or a three-week low during the early Asian session. Spot prices have now moved back closer to over a two-year low touched in January and seem vulnerable to prolonging a multi-month-old downtrend. 

The US Dollar (USD) surges across the board in reaction to US President Donald Trump's decision over the weekend to impose 25% duties against Canada and Mexico, and an additional 10% duty on China. This marks the start of a new global trade war and tempers investors' appetite for riskier assets. The anti-risk flow provides a goodish lift to the safe-haven buck, which turns out to be a key factor that exerts downward pressure on the EUR/USD pair. 

Meanwhile, Trump announced on Friday evening that he would slap tariffs on goods from the European Union. This comes on top of the European Central Bank's (ECB) dovish stance, which continues to undermine the shared currency and contributes to the offered tone surrounding the EUR/USD pair. In fact, the ECB lowered borrowing costs by 25 basis points (bps) last Thursday, as expected, and left the door open for more rate cuts by the end of this year. 

This marks a big divergence in comparison to the Federal Reserve's (Fed) hawkish pause, which favors the USD bulls and supports prospects for a further depreciating move for the EUR/USD pair. That said, the recent sharp pullback in the US Treasury bond yields acts as a headwind for the buck and could offer some support to spot prices. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.