Markets are optimistic ahead of Donald Trump's inauguration. Increased risk appetite has allowed EUR/USD buyers to recover from Friday's lows, with the pair now trading above the 1.0300 target and even testing the 1.04 level. However, there are no specific drivers to support an upward trend: Monday's economic calendar was nearly empty. Germany's Producer Price Index (PPI) was released during the European session, coming in weaker than expected (-0.1% m/m and 0.8% y/y), but traders largely ignored the report.

Looking ahead, despite EUR/USD's confident growth, opening positions on the pair remain highly risky. Given the unpredictability surrounding the 47th U.S. president, both long and short positions appear equally unreliable.

In my opinion, U.S. media insiders have overly "sugarcoated" Trump's presidency. Remember the market's reaction to his victory in November—panic was rampant among traders, leading to widespread fear and uncertainty. At that time, the U.S. dollar strengthened as a safe-haven asset.

Now, the situation seems almost the opposite. Markets are exhibiting irrational optimism, and the dollar is facing downward pressure. The U.S. Dollar Index struggled to maintain its position above the 109 level and is currently trending downward.

The question arises: did one version of Trump win the election (a trade-war instigator and protectionist), while another version (a diplomat) is entering the Oval Office today? Or is this merely a collective illusion fueled by media insiders?

While we can only speculate, it appears that traders are placing excessive hope in Trump's diplomatic approach, overlooking his leadership style during his first term. Trump is, above all, a seasoned businessman who often applied business tactics to politics. For instance, in 2019, just a week before key trade talks with China, he raised tariffs on $237 billion worth of Chinese goods, using the tariffs as a bargaining chip with Xi Jinping.

Such tactics are likely to define his second term, potentially with an even broader geographic focus. Does anyone in the market genuinely believe that the Republican has abandoned his idea of imposing 10% tariffs on all U.S. imports and 60% tariffs on Chinese goods?

Today marks a significant moment. Last fall, Trump promised to sign an executive order to raise tariffs on imports from Canada, Mexico, and China "immediately after the inauguration," which was to be on his first day as president. In addition, he also committed to introducing an additional tariff rate specifically on Chinese products.

According to a report from the Wall Street Journal, President Donald Trump will not sign any "tariff orders" immediately following his inauguration. Instead, this issue has been postponed for further discussion. This decision may be linked to an insider report stating that Trump could visit China within the first 100 days of his presidency. Among the many executive orders he plans to issue—cancelling numerous actions and policies from the Biden administration in areas like illegal immigration, diversity and inclusion, and climate regulations—there reportedly will be no tariff-related orders. Moreover, Reuters has indicated that Trump will not announce any tariffs on his first day in office. Sources suggest that he will first direct his agencies to investigate the nature of trade deficits and the unfair trade and currency practices of other countries. Based on their findings, appropriate response measures will then be considered.

Similarly, Bloomberg insiders claim the new administration is considering a gradual, "gentler" tariff increase approach.

As a result, previous concerns during Trump's presidency have unexpectedly shifted to a sense of optimism. This change has led to an increased appetite for risk assets, while the safe-haven dollar has faced significant pressure.

However, maintaining long positions on the EUR/USD remains highly risky. Trump's "peaceful" stance could change quickly if China refuses to meet U.S. demands. The absence of tariffs on Day One does not eliminate the possibility of their introduction on Day 20 or Day 100. Furthermore, even without executive orders, Trump could escalate his rhetoric to a more ultimatum-like tone.

Therefore, despite the recent growth in the EUR/USD pair, a wait-and-see approach is advisable. If Trump switches from "peace to fury," even if only in his rhetoric, the fragile narrative of "peaceful" relations could collapse suddenly. In such a scenario, the dollar would likely see renewed demand, driven by a surge in risk aversion across the market.