EUR/USD Stabilizes Above 1.0760 as Dollar Index Slips 0.16%

Key moments

• The EUR/USD pairing, having faced a six-day consecutive drop, managed to reverse its trajectory and climb 0.12%.
• The U.S. Dollar Index fell 0.16%.
• Concerns regarding potential economic slowdowns exerted pressure on the U.S. Dollar Index.

EUR/USD Recovers After Notable Slump

Fluctuations saw the euro struggle on Thursday, with the EUR/USD falling below 1.0740 earlier today. This period was followed by a recovery that saw the pair climb past the 1.0760 threshold. This upward movement occurred amidst a general weakening of the dollar, as reflected in a 0.16% decline in the Dollar Index. However, the prevailing risk-averse market environment has provided support for the dollar as a safe-haven currency, which has acted to limit the euro’s upward momentum.

Market pessimism was largely fueled by the U.S. administration’s trade policies, which contributed to this dollar depreciation. Specifically, the recent imposition of a 25% tariff on imported automobiles and light trucks by the U.S. President has generated apprehension about the future of global trade.

Adding to the complexity of the situation, the U.S. government’s decision to implement these automotive tariffs follows earlier measures, including levies on steel and aluminum imports, and precedes planned reciprocal tariffs. This series of trade actions has created an atmosphere of uncertainty, overshadowing positive economic data releases, such as the better-than-expected U.S. Durable Goods Orders, which rose 0.9% in February. Moreover, the Federal Reserve’s projected interest rate cuts have also affected the greenback negatively.

The U.S. tariffs were met with global scrutiny, with the chances of escalating trade tensions rising, as indicated by the European Union’s intentions to implement retaliatory tariffs. The situation has tempered bullish sentiment surrounding the euro.

Market participants are now closely monitoring upcoming U.S. economic data releases, including the final Q4 GDP figures, weekly jobless claims, and pending home sales. The market is also anticipating the U.S. Personal Consumption Expenditure (PCE) Price Index, scheduled for release on Friday. Additionally, speeches from Federal Open Market Committee (FOMC) members are expected to provide further insight into the direction of U.S. monetary policy.