EUR/USD has strengthened to near 1.0470 after bouncing back from a two-week low of 1.0360. This recovery follows European leaders, including Ukrainian President Zelenskyy, expressing readiness to develop a peace plan for Ukraine.
The European Central Bank (ECB) is expected to cut its Deposit Facility Rate by 25 basis points to 2.5% this Thursday. ECB concerns about US tariffs possibly harming Eurozone economic growth are rising amid a slowdown in inflation, with the Harmonized Index of Consumer Prices (HICP) showing a growth of 2.4% in February.
Us Dollar Index Performance
The US Dollar Index (DXY) has dipped below 107.00 as fears regarding US tariffs on Canada and Mexico have decreased. Although tariffs are confirmed, their actual percentage remains uncertain.
There is a growing expectation that the Federal Reserve may cut interest rates in June, supported by a decline in consumer spending data. This week, market attention will shift towards key US economic indicators, including Nonfarm Payrolls and Manufacturing PMI data.
Despite the recent rebound, the near-term outlook for EUR/USD appears bearish, with a critical support level at 1.0285 and a resistance level at 1.0530.
The recent rebound in EUR/USD to around 1.0470 comes off the back of a broader shift in sentiment, particularly in response to efforts towards a potential peace plan in Ukraine. European leaders, including Volodymyr, have signalled they are open to discussions, which has contributed to renewed confidence in the Euro.
A key focus this week will be the European Central Bank’s policy decision on Thursday, where we expect a 25-basis-point reduction in the Deposit Facility Rate, bringing it to 2.5%. The ECB has been increasingly wary of the potential damage that US tariffs could inflict on the Eurozone economy, especially as inflation pressures ease. February’s HICP report confirmed inflation at 2.4%, reinforcing arguments for a cut to ensure economic stability.
On the US side, the Dollar Index has slipped below the 107.00 mark, reflecting easing concerns surrounding tariff risks linked to Canada and Mexico. Although these tariffs are set to go ahead, the precise rates remain unknown. This lingering uncertainty has likely kept traders cautious, leading to some weakness in the Dollar’s strength against other currencies.
Federal Reserve Rate Expectations
Interest rate expectations in the United States are also shifting. Markets are increasingly betting on a potential rate cut from the Federal Reserve in June, particularly as consumer spending data continues to soften. If these trends persist, the case for policy easing would strengthen. In the coming days, attention will turn to key US economic reports, with Nonfarm Payrolls and Manufacturing PMI figures poised to shape sentiment further.
For those watching EUR/USD in the short term, technical conditions suggest that downward risks remain, despite this recent bounce. A key support sits at 1.0285, while resistance is marked at 1.0530. How the pair moves within this range will depend on the upcoming data and central bank actions on both sides of the Atlantic.
