While Donald Trump is attempting to reach an understanding with China, Federal Reserve Governor Adriana Kugler stated that the current tariff policy is likely to exert upward pressure on prices and may have a more significant economic impact than previously anticipated.

Kugler emphasized that she supports keeping borrowing costs unchanged and will continue to do so until inflation risks subside and economic activity and employment show stability. "The economy is facing heightened uncertainty, with risks of rising inflation and risks to employment," Kugler said in a speech prepared for an event at the University of Minnesota in Minneapolis. "This month, we learned that the tariffs will be much larger than previously expected," she noted. "As a result, the economic effects of the tariffs and the uncertainty they bring are also likely to be greater than previously assumed."

To recap, President Donald Trump announced sweeping tariffs on U.S. trading partners earlier this month, including levies exceeding 145% on Chinese goods. While considerable uncertainty remains surrounding the tariffs—especially after Trump said yesterday he might reduce trade surcharges on China—economists generally expect the measures to weigh on economic growth and stoke inflation in the U.S.

During a Q&A session following her prepared remarks, Kugler said she did not view the recent market turmoil as a sign that the public is losing confidence in the central bank. "The uncertainty is not coming from us," she said. The policymaker focused much of her speech on specific monetary policy challenges. She stressed the importance of allowing time for the Fed's policy to fully assess the state of the economy, adding that such lags are crucial as officials need to be proactive in understanding the effects of various shocks. "For monetary policy, it's essential to examine all available data, including market indicators, surveys, and anecdotal reports, to gain an early understanding of what's happening in the economy. As I've mentioned, it takes time for Trump's policies to impact the economy," Kugler said.

Current Technical Picture for EUR/USD

Buyers should now be focusing on reclaiming the 1.1360 level. Only after that will a test of 1.1430 become feasible. From there, the pair could reach toward 1.1500, although doing so without the support of major players will be difficult. The most distant target is the 1.1570 high. In the event of a decline, I expect significant buyer interest only near 1.1280. If there is no activity at that level, it would be prudent to wait for a retest of the 1.1210 low or consider opening long positions from 1.1150.

Current Technical Picture for GBP/USD

Pound buyers must break through the nearest resistance at 1.3300. Only then will they be able to target 1.3350, which remains a tough level to breach. The ultimate upside target is the 1.3416 level. If the pair declines, bears will attempt to regain control at 1.3240. Should they succeed, a break below that range would deal a significant blow to the bulls and push GBP/USD toward the 1.3205 low, with the potential for a further move down to 1.3165.