The euro’s brief stability following the European Central Bank’s (ECB) recent interest rate decision proved short-lived. The EUR/USD pair has resumed its downward trend, closing near the 1.0350 support level after failing to surpass 1.0533.
ECB Rate Cut and Its Impact
The ECB, as widely anticipated, cut interest rates by 25 basis points. While ECB President Christine Lagarde acknowledged the eurozone economy’s weakness in the near term, she also pointed to an expected recovery. The central bank stressed that future rate cuts will depend on economic data. Despite this, the euro’s initial stability following the decision didn’t last, as the dollar began to gain strength.
Dollar’s Safe-Haven Appeal and US Tariffs
The US dollar has benefited from increased demand as a safe-haven asset, driven by the US administration’s approval of tariffs on goods from countries including China, Canada, and Mexico. These tariffs are expected to negatively impact global economic recovery and increase inflation.
Federal Reserve and Interest Rate Outlook
The Federal Reserve (Fed) recently held US interest rates steady and maintained its hawkish stance, indicating they are in “no hurry” to cut rates. This, combined with criticism from US President Trump on the Fed’s policies, further underscores the complexity of the current economic landscape. The market will be watching for potential rate cuts in May/June. The FOMC meeting held few surprises, with the Fed’s message mirroring their stance in December, reinforcing their commitment to battling inflation.
EUR/USD Technical Outlook
The EUR/USD pair remains bearish on the daily chart. A break below the 1.0330 support level could trigger further selling pressure, potentially leading the pair toward 1.0280 and 1.0190, approaching parity. However, these levels may also lead to oversold conditions according to technical indicators. Resistance levels to watch for potential pullbacks include 1.0470, 1.0550, and 1.0630. The EUR/USD’s movements remain highly sensitive to US jobs data releases later in the week, which often influence expectations for the Fed’s future monetary policy. The euro’s gains are expected to remain vulnerable.
Key Takeaways
- The euro’s post-ECB stability was temporary, as the dollar regained strength.
- US tariffs are boosting the dollar’s safe-haven status.
- The Fed is holding firm on interest rates, suggesting no imminent rate cuts.
- EUR/USD is technically bearish, with potential for further losses.
- US jobs data will be crucial for the near-term market direction.
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