EUR/USD misses the boat on market-wide tariff relief rally
- EUR/USD couldn’t find the gas pedal on Wednesday, flubbing a broad risk appetite recovery.
- The Trump administration has again pivoted away from its own tariffs at the last minute.
- Key US inflation and consumer sentiment survey results remain on the docket for the rest of the week.
EUR/USD remains bogged down on the carts, caught in the much between 1.1000 and 1.0900 despite a broad-market recovery in investor risk appetite after the US once again pivoted away from its own tariff policies. US President Donald Trump announced via social media post that his administration would be delaying “reciprocal” tariffs for 90 days, albeit with a 10% across-the-board levy remaining on the cards for the time being. Global investors promptly found the buy button on the news, however, the Euro’s brief rally into the 1.1100 handle quickly evaporated to leave Fiber in familiar congestion territory.
Rate markets have pulled back sharply from their previous expectations of rate cuts, as rate swap traders are currently anticipating 75 basis points of interest rate reductions from the Federal Reserve (Fed) for the rest of the year. While rate markets continue to bet on a quarter-point cut happening in June, analysts at JPMorgan caution that it is more probable the Fed will continue its wait-and-see phase due to tariff uncertainties, and will likely continue to do so until at least September.
Consumer Price Index (CPI) inflation data is due out on Thursday, while Producer Price Index (PPI) inflation and the University of Michigan (UoM) Consumer Sentiment Index results will be released on Friday. This will represent the final set of significant US inflation and sentiment figures from the ‘pre-tariff’ period of 2025, serving as critical benchmarks for the remainder of the year.
EUR/USD price forecast
EUR/USD cut off a two-day losing streak this week, marking in a near-term technical support level near 1.0900. However, bidding pressure remains thin, and a mild push from the short side could easily push Fiber back to the 200-day Exponential Moving Average (EMA) just south of 1.0700.
Despite a sharp recovery by the Euro through March, a stiff resistance zone remains priced in between 1.1100 and 1.1000.
EUR/USD daily chart
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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