The euro is trading near $1.08, below its recent high, as investors consider incoming economic data and dovish signals from European Central Bank (ECB) officials. Eurozone private sector activity is expanding but not as strongly as anticipated, and several ECB officials are hinting at an imminent rate cut, potentially as early as April.
- The euro hovered around $1.08, below the five-month high of $1.095 reached on March 18th.
- Eurozone private sector activity expanded at its fastest pace since August, but fell short of market expectations.
- Manufacturing output rebounded, but the services sector slowed down.
- ECB official Cipollone suggested the case for a rate cut is strengthening due to faster-than-anticipated inflation deceleration.
- ECB official Stournaras stated that all signs point to a rate cut in April.
- President Lagarde cautioned about weaker economic growth.
- Lagarde downplayed inflation risks if the EU retaliated against US tariffs.
- ECB’s de Galhau reinforced the view that the central bank has room to further ease borrowing costs.
The convergence of factors suggests a potential weakening of the euro. Slower-than-expected economic growth paired with increasing expectations of interest rate cuts by the ECB place downward pressure on the currency’s value. The potential impact of retaliatory tariffs adds further uncertainty, reinforcing the likelihood of a less robust euro in the near term.