The euro experienced a significant upward movement, surpassing $1.11 for the first time since late September 2024. This rally was fueled by the EU’s decision to suspend new tariffs on the US, aimed at facilitating trade negotiations. Simultaneously, shifts in monetary policy expectations are occurring, indicating a potential recalibration of the European Central Bank’s (ECB) approach to interest rates.
- The euro climbed above $1.11 after the EU suspended new tariffs on the US for 90 days.
- President Trump reduced tariffs on countries that did not retaliate to 10%, while raising duties on Chinese imports to 125% from 104%.
- Money markets now anticipate an ECB deposit facility rate of 1.8% by December.
- The probability of an April rate cut by the ECB has decreased to 90%.
The presented information suggests a strengthening euro driven by both trade policy developments and evolving expectations surrounding monetary policy. The temporary truce in trade tensions with the US has alleviated immediate concerns regarding economic slowdown and inflation, though lasting uncertainty remains. The market’s reassessment of future ECB rate cuts implies a potential shift in the central bank’s strategy, further influencing the euro’s valuation.