The euro is trading near its highest level since early October 2024, hovering around $1.10. The dollar is facing downward pressure as investors monitor increasing trade war tensions. Market expectations for ECB monetary easing are rising.
- The euro is near its strongest level since early October 2024, around $1.10.
- The dollar is under pressure.
- China announced plans to impose 34% tariffs on all U.S. goods starting April 10.
- President Trump implemented a 10% tariff on all imports, with higher rates for select countries, including 20% on EU goods and an additional 34% on Chinese goods.
- French President Macron called on companies to suspend U.S. investments.
- The European Commission is preparing retaliatory measures.
- Markets are increasing expectations of further monetary easing by the ECB.
- Investors are pricing in a 90% probability of a 25-basis-point rate cut in April.
- The ECB’s deposit rate is expected to decline to 1.65% by December from the current 2.5%.
The euro’s relative strength is being influenced by a confluence of factors. While trade tensions create uncertainty, they are simultaneously impacting the dollar’s value. The expectation of interest rate cuts by the European Central Bank suggests a future environment where the currency may become less attractive to investors, but for the moment, the euro is benefiting from the weakness of the dollar and the potential for retaliatory measures by Europe in response to US trade policy.