Key Points
- EUR/USD recovered 0.4%, climbing to 1.0423, after dipping to 1.03599 earlier.
- Tariff uncertainty remains, with the U.S. reconsidering a full 25% tariff on Canada and Mexico ahead of Tuesday’s deadline.
- Optimism over European-led peace efforts and tariff discussions supported the euro.
EUR/USD Rises as European Diplomacy Gains Traction
The euro rebounded to $1.0423, pulling away from Friday’s low of $1.03599, after European leaders intensified their push for a Ukraine peace settlement. Following a tense Oval Office meeting between Trump and Zelenskiy, European officials, including UK Prime Minister Keir Starmer, committed to drafting a peace proposal for Washington’s review. This renewed diplomatic effort helped buoy the euro, lifting sentiment after last week’s losses.
Sterling (GBP/USD) followed suit, gaining 0.2% to $1.2604, as traders reassessed European stability risks.
Tariff Risks and ECB Rate Outlook Keep Euro Volatile
Despite the euro’s recovery, traders remain cautious as U.S. tariff decisions loom. U.S. Commerce Secretary Howard Lutnick hinted that the Canada and Mexico tariffs set for Tuesday may be reduced from 25%, offering some relief to global markets.
Meanwhile, the European Central Bank (ECB) maintains its cautious stance on rate cuts, with market participants pricing in a 25-basis-point reduction by June. However, persistent inflationary concerns and trade risks could complicate the ECB’s easing trajectory, limiting further euro gains.
Dollar Pause Gives Euro Leg-Up
The EUR/USD pair is experiencing a minor upward trend of 0.01%, with the price opening at 1.04038 and closing at 1.04050. The pair tested a high of 1.04232 before facing resistance, while the low was recorded at 1.03992. The moving averages (5, 10, 30) indicate a consolidation phase, as the price fluctuates near key levels without a clear breakout. The MACD histogram is flatlining near zero, suggesting weak momentum and indecision among traders.
Picture: Euro finds temporary footing, but volatility looms ahead, as seen on the VT Markets app
In the short term, a breakout above 1.0423 could lead to a test of 1.0440, while failure to hold above 1.0400 may drive a retest of 1.0380 or lower. Key catalysts include U.S. economic data, Federal Reserve commentary, and Eurozone inflation figures, which could provide the next directional cue.
Traders will closely watch developments in the Ukraine peace talks and U.S. tariff negotiations for further direction.
