The EUR/USD currency pair is making notable gains as it builds on a recovery from a nearly one-month low in the 1.1750-1.1740 range. The upward momentum has propelled the pair to approximately 1.1835 during the Asian trading session, driven by a broadly weaker US Dollar.
Despite facing legal challenges, US President Donald Trump has reaffirmed his commitment to his trade agenda, swiftly introducing a new framework for 15% tariffs. This move follows a Supreme Court ruling that limited Trump’s authority to impose extensive reciprocal tariffs under the International Emergency Economic Powers Act. The rapid introduction of these tariffs has raised concerns about potential economic ramifications stemming from escalating trade tensions.
Adding to the USD’s woes, a disappointing US GDP report has overshadowed otherwise strong inflation data. The first estimate of the US economy’s fourth-quarter performance revealed a significant slowdown, with GDP growth decelerating to just 1.4% on an annualized basis during the October-December period. This marked a stark decline from 4.4% growth in the previous quarter and fell well short of market expectations. Meanwhile, the core Personal Consumption Expenditure (PCE) Price Index showed a monthly increase of 0.4% in January, with the year-on-year rate reaching 3.0%, the highest since November 2023. This scenario has led to speculation that the Federal Reserve may maintain interest rates during its upcoming policy meeting in March.
However, market participants are increasingly pricing in expectations for lower borrowing costs, with predictions of two 25-basis-point rate cuts by June 2026. This outlook is exerting downward pressure on the USD, providing additional support for the EUR/USD pair.
Yet, uncertainty surrounding the tenure of European Central Bank (ECB) President Christine Lagarde, coupled with ongoing trade war anxieties, could pose challenges for the euro. Statements from the European Parliament’s trade chief indicate that the European Union plans to pause the ratification process of the trade deal with the United States until more clarity is obtained on the Trump administration’s trade policies.
In market updates regarding the US Dollar, it has exhibited varied performance against other major currencies, with notable strength against the Australian Dollar. The accompanying heat map details the percentage changes of the US Dollar against several currencies, highlighting a particularly weak showing against the euro, British pound, and Japanese yen.
As the week unfolds, traders and analysts will closely monitor these developments—both in US economic conditions and international trade dynamics—as they continue to influence currency valuations across the board.
