The euro experienced an upward movement against the dollar, reaching $1.12. This gain was primarily fueled by a weakening dollar, which itself was impacted by lower-than-expected US inflation data and increasing anxieties among investors regarding US-China trade negotiations. Despite a temporary tariff truce, existing tariffs remain high. Monetary policy expectations are also shifting, with increased anticipation of ECB rate cuts amidst concerns about the impact of US tariffs on growth.
- The euro climbed back to $1.12.
- The dollar weakened due to weaker US inflation data and US-China trade negotiation concerns.
- A 90-day tariff truce between the US and China was agreed upon, but tariffs remain elevated.
- Money markets now price the ECB’s deposit facility rate at 1.79% by year-end.
- Markets are almost fully pricing in a 95% chance of a rate cut in June.
- ECB policymaker François Villeroy de Galhau stated there was room for another rate cut by summer.
- ECB policymaker Joachim Nagel expressed optimism about inflation converging toward the 2% target.
The provided details suggest a complex and somewhat contradictory outlook for the euro. While external factors, such as the weakening dollar driven by US inflation concerns and trade uncertainties, provide upward momentum, internal monetary policy considerations introduce potential downward pressure. The ECB’s anticipated rate cuts, intended to stimulate growth in the face of US tariffs, could ultimately temper any gains made against the dollar. The differing views of ECB policymakers further contribute to the uncertainty surrounding the currency’s future trajectory.