- EUR/USD advanced to multi-month highs near 1.1150 on Thursday.
- The US Dollar collapsed to levels last seen in early October.
- Markets’ attention now shifts to the release of US NFP and Powell’s speech.
The Euro (EUR) once again finds its footing, pushing beyond the 1.1100 mark against the US Dollar (USD) for the first time since October 2024. Indeed, EUR/USD advanced to the 1.1150 region—multi-month highs—on the back of the acute downside pressure on the Greenback, driving the US Dollar Index (DXY) to the low-101.00s as investors continued to digest President Trump’s “Liberation Day.”
Fresh tariffs rattle the EU… and the rest of the world
Back to “Liberation Day”, a new trade plan will impose a baseline 10% tariff on imports from all U.S. trading partners, while layering on additional country-specific levies ranging from 10% to 50%.
Under these rules, China faces a hefty 34% surcharge on top of an existing 20% duty, while the European Union (EU) sees a 20% tariff, the UK 10%, and Japan 24%.
Furthermore, the baseline tariff takes effect on Saturday, April 5, with the more punitive reciprocal rates kicking in on Thursday, April 9.
Glimmers of hope in Eastern Europe
Geopolitical tensions in Eastern Europe have eased somewhat, as Ukrainian President Volodymyr Zelenskiy announced a couple of weeks ago a ceasefire that covers vital energy infrastructure and Black Sea routes—an agreement partially brokered by the United States.
Adding to this cautious optimism, President Trump hinted last week at a possible US-Ukraine mineral revenue-sharing deal, which could pave the way for increased American investment in Ukraine’s energy sector.
Central banks walk a tightrope
The Federal Reserve (Fed) kept rates steady at its last meeting, recognising that ongoing trade disputes could stoke inflation and potentially justify a more hawkish policy. At the same time, early signs of slowing economic growth demand caution. Fed Chair Jerome Powell reiterated a “data-dependent” approach, noting that up to 50 basis points of easing might still be considered this year if the economy deteriorates.
Meanwhile, the ECB lowered its key rate by 25 basis points and hinted at additional easing if uncertainty persists. Fresh projections point to softer growth and stubborn near-term inflation, though policymakers see inflation easing by 2026. ECB President Christine Lagarde warned that a US-EU tariff battle could shave 0.5% off Eurozone GDP, even as she applauded Germany’s fiscal stimulus efforts.
Money markets currently price an 80% chance of a rate cut this month.
It is worth recalling that, on Wednesday, Lagarde stressed that tariffs would have a negative global impact depending on their scope and duration. In addition, Board member Isabel Schnabel noted the significant influence of US policies on Europe, while Robert Holzmann argued that with eurozone inflation easing and current rates not hindering growth, further rate cuts are unnecessary. He also cautioned that a potential trade war could force central banks to consider unconventional measures.
Euro bulls make a comeback
Speculative traders are gradually warming to the Euro. Net long positions have risen for three straight weeks, topping 65K contracts—the highest since late September 2024. However, hedge funds continue to expand short positions, which now exceed 100K contracts, according to the latest CFTC data.
EUR/USD: Charting the next moves
EUR/USD’s immediate upside is capped by the 2025 peak at 1.1145 (April 3), ahead of the round level at 1.1200 and the 2024 high at 1.1213 (September 25).
On the other hand, the pair finds its first layer of support at the weekly low of 1.0732 (March 27), in tandem with the 200-day SMA. A clear break beneath this zone could open the door for a deeper correction toward the provisional 55-day SMA at 1.0594.
The Relative Strength Index (RSI) has climbed past 70, entering the overbought region, while an Average Directional Index (ADX) reading above 28 suggests moderate overall trend strength.
EUR/USD daily chart
Looking ahead
All eyes remain on any developments related to US trade policy, further developments in Eastern Europe, and fresh signals from both the Fed and ECB. With so many factors in flux, traders will closely track Friday’s speech by Chair Jerome Powell as well as the release of the Nonfarm Payrolls for a sense of where EUR/USD might head next.
