EUR/USD is currently around 1.0880 as it holds steady ahead of the US Retail Sales data release. The US Dollar remains firm despite a drop in the University of Michigan’s preliminary Consumer Sentiment Index, which fell to 57.9 in March, the lowest since November 2022.
Expectations suggest that the Federal Reserve may keep its policy unchanged during its meeting. There’s a 75% probability of a quarter-point rate cut by June according to the CME FedWatch tool.
Euro Gains Strength Amid German Debt Reform
The Euro has gained strength following Germany’s agreement on a debt overhaul and increased state spending. A parliamentary vote on this reform is set for Tuesday, and a positive outcome could enhance the EUR/USD pair.
Additionally, discussions are ongoing regarding a potential ceasefire between the US and Russia. Reports indicate that President Trump’s envoy expects talks between Trump and Putin, reflecting a possible easing in geopolitical tensions.
European Central Bank officials have voiced concerns about economic uncertainty stemming from US policies and have called for a stronger global role for the Euro. They suggest that a savings and investment union could attract more international interest in the currency.
Overall, various factors including economic data and global sentiment are influencing the Euro’s position in the market.
The EUR/USD pair is essentially marking time around the 1.0880 level as we await fresh data from the US. While the University of Michigan’s preliminary Consumer Sentiment index took a visible downturn to 57.9 in March—its weakest figure since late 2022—the US dollar has yet to show vulnerability. Traders are clearly maintaining confidence in the greenback, despite signs of weakening consumer sentiment from American households.
There still appears to be widespread belief that the Federal Reserve will leave rates unchanged in its next meeting. At present, the CME FedWatch tool assigns a 75% likelihood that a 25-basis-point reduction will arrive no later than June. That figure remains remarkably stable, even as economic indicators send mixed signals.
On the other side of the Atlantic, the euro has found renewed support. The German government’s progress on debt reform and its commitment to increased state expenditure have reassured investors. Bundestag approval for the financial overhaul is expected Tuesday. Should lawmakers back the package, that could bolster confidence, potentially providing a further lift for the single currency.
Meanwhile, geopolitical developments continue to create uncertainty. Ongoing discussions about a possible ceasefire between Washington and Moscow have drawn much attention. Reports suggest that high-level dialogue could be forthcoming, with an envoy close to Trump hinting at potential direct talks with Putin. If these negotiations gain traction, that might dampen demand for the US dollar as a safe-haven asset.
Eurozone Officials Address Global Economic Risks
Within the eurozone, central bankers are voicing concerns about external policy risks, particularly from the US. Several officials have advocated for broader efforts to strengthen the euro’s global standing. Their proposal for a savings and investment union could theoretically enhance liquidity and attract greater international participation in euro-denominated assets. However, such structural shifts take time, meaning any immediate impact on the common currency’s valuation will likely be limited.
The coming weeks will be guided by key US economic data, shifts in rate expectations, and further geopolitical manoeuvres. The euro’s ability to extend its momentum will depend on political and economic tailwinds breaking in its favour, while the dollar’s resilience will be tested as investors continue weighing the Fed’s next steps.
