The euro has recovered from recent lows against the dollar, influenced by shifting sentiments surrounding US-China trade relations and concerns about the US economy. The initial optimism following a tariff truce has waned, and investors are adopting a wait-and-see approach. Meanwhile, the European Central Bank is anticipated to continue its rate-cutting policy, contingent upon inflation trends.
- The euro traded around $1.12, rebounding from one-month lows reached on May 12th.
- Initial optimism from US-China tariff reduction faded, with investors awaiting further developments.
- Renewed concerns about a potential slowdown in the US economy have weighed on the dollar.
- The ECB is expected to continue cutting borrowing costs in June and potentially beyond.
- ECB rate cuts may be nearing their end if the baseline inflation forecast holds true.
- Eurozone inflation held steady at 2.2% in April, while core inflation rose to 2.7%.
- First-quarter GDP growth was revised down to 0.3%, from an initial estimate of 0.4%.
The performance of the euro hinges on several factors. The interplay between US-China trade dynamics, the health of the US economy, and the future course of the ECB’s monetary policy will likely dictate its value. While inflation data offers some hope, revised GDP figures suggest potential headwinds. The asset’s trajectory appears sensitive to both external global events and internal Eurozone economic indicators.