The euro experienced a slight increase, nearing the $1.08 mark, benefiting from a generally weaker dollar. However, escalating trade tensions pose a significant threat to the European economy, particularly with potential tariffs from the US and retaliatory measures from the EU on the horizon. Despite these challenges, the European Commission is seeking a negotiated resolution. Monetary policy is also playing a role, with the ECB having recently lowered borrowing costs and hinting at possible future cuts.
- The euro edged higher, approaching $1.08.
- The rise was supported by broad dollar weakness.
- The US announced a 25% tariff on “all cars not made in the United States.”
- The US threatened “far larger” tariffs on the EU and Canada if they retaliate.
- The EU is expected to retaliate with its own tariffs next week.
- European Commission President vowed to protect the EU’s workers, businesses, and consumers.
- Tariffs are likely to hit the European economy hard, particularly Germany.
- Nearly a quarter of the EU’s vehicle exports go to the US.
- The ECB lowered borrowing costs by 25 bps in March.
- ECB official Cipollone suggested that the case for another rate cut is strengthening.
The euro’s near-term performance is caught between conflicting forces. While a weaker dollar provides some upward momentum, the looming threat of a trade war casts a long shadow over the European economy, especially given its reliance on exports to the US. Further downward pressure could arise from the ECB’s dovish monetary policy stance, potentially diminishing the euro’s appeal to investors seeking higher yields. This creates a complex environment for the currency, with its trajectory heavily dependent on the evolving trade landscape and central bank actions.