The euro maintained its position around $1.165, largely retaining its year-to-date gains. Market participants are currently evaluating recent economic data and the unfolding developments in trade relations between the EU and the US. Positive PMI data indicates increased economic activity within the Eurozone, bolstering arguments against aggressive interest rate cuts by the ECB. Concurrently, details regarding a potential EU-US trade agreement suggest that a significant portion of European goods could face 15% levies, although certain key sectors might be exempt from previously threatened tariff increases.
- The euro is holding around the $1.165 mark.
- Eurozone economic activity rose the most in 15 months, driven by higher new orders and price gauges.
- The data supports less aggressive rate cuts by the ECB; ESTR futures suggest one 25bps rate cut this year.
- EU-US trade deal details indicate most European goods will face 15% levies.
- Autos, pharmaceutical goods, and chips may be exempt from higher sector tariffs from the US.
- The euro rallied 11% against the dollar this year.
- EU nations are signaling increased expenditure to stimulate industry, infrastructure, and defense.
- Uncertain economic policy and fiscal stress in the US triggered a flight away from the dollar.
The information suggests a generally positive outlook for the euro. The Eurozone’s strengthening economy and potential fiscal stimulus, coupled with uncertainties surrounding the US dollar, are creating a favorable environment for the currency. The impact of proposed tariffs on goods may be less severe than initially feared, potentially mitigating negative consequences for the Eurozone economy. The factors suggest the euro could maintain, or potentially increase its value, against the dollar.