Euro Hits 3-Week High on Fresh Optimism
The Euro gained against US dollar, settling at $1.05, its strongest level since late January due to fresh optimism amidst global tariff combats. With the trade war, demand for US dollar has increased, causing the greenback to record gains against its pairs.
The global markets have continued to assess the impact of President Trump’s trade policies and ongoing geopolitical developments. Trump announced plans for country-specific reciprocal tariffs, set to take effect as early as April, though markets remain cautiously optimistic that negotiations could avert their full implementation.
Additionally, diplomatic efforts to end the war in Ukraine continued in Munich, with Trump pledging to accelerate peace talks following discussions with Russian President Putin and Ukrainian President Zelenskyy. EUR/USD rose as high as 1.0514, fueled partly by optimism about Ukraine peace discussions.
Ukrainian President Volodymyr Zelenskiy said he was prepared to talk to President Vladimir Putin once Ukraine had agreed on a common plan with U.S. President Donald Trump and European leaders. Britain’s foreign minister David Lammy said that he and U.S. Vice President JD Vance agreed Zelenskiy must be part of any peace talks.
EUR/GBP looks likely to get caught between two themes over coming months, according to ING note. Internationally it’s all about trade and the EU is seen as far more exposed than the UK when it comes to Trump’s trade war, the bank said. Analysts noted that UK’s goods exports are reasonably small and it’s helpful that it actually runs a trade deficit with the US.
However, the domestic story looks sterling negative. The chancellor is threatened with breaching the government’s fiscal rule if growth forecasts are cut. Thus tighter fiscal policy in March could be a catalyst for more Bank of England (BoE) easing to be priced, according to analysts note.
“We see the second quarter of this year as the time of peak US tariffs, with new layers to be added after the Commerce Department publishes a report as to why the US has been running structural deficits,” ING said.
This should come at a time when the European Central Bank is considering cutting rates sub 2% and may well send EUR/USD close to parity. #Euro Hits 3-Week High on Fresh Optimism# US Dollar Falls as Markets Price in Reciprocal Tariffs Delay
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