The euro maintained its strength around $1.165, largely retaining gains made this year. Recent economic data from the Eurozone indicates increased activity, potentially influencing ECB policy decisions. Trade developments between the EU and the US are also being closely watched, particularly regarding potential tariffs on various goods. Simultaneously, the euro has benefitted from EU nations increasing expenditure to stimulate industry, infrastructure, and defence, as well as a flight from the dollar, caused by uncertain economic policy and fiscal stress in the US.
- The euro held around the $1.165 mark, maintaining most of its year-to-date rally.
- Eurozone economic activity rose the most in 15 months, driven by higher new orders and price gauges.
- The rise in economic activity strengthens the case for less rate cuts by the ECB.
- ESTR futures suggest a broad consensus of one 25bps rate cut this year.
- Most European goods will be subject to 15% levies under the EU-US trade deal.
- Autos, pharmaceutical goods, and chips may be exempt from higher sector tariffs threatened by the US.
- The euro rallied 11% against the dollar this year.
- EU nations are increasing expenditure to stimulate industry, infrastructure, and defense.
- Uncertain economic policy and fiscal stress in the US triggered a flight away from the dollar.
The currency’s resilience is supported by positive economic momentum within the Eurozone and shifts in global financial flows. Stronger economic activity and the potential for fewer interest rate cuts by the European Central Bank are positive signals. Additionally, shifts in trade dynamics between the EU and the US, coupled with domestic economic factors in the US, further influences the currency’s value. The combination of these factors paints a complex picture of current market conditions, suggesting continued scrutiny and potentially fluctuating values for the asset as developments continue.