EUR/USD has risen to nearly 1.0900 at the start of the week as traders await the Federal Reserve’s interest rate decision on Wednesday. The Fed is expected to maintain rates within the 4.25%-4.50% range, with focus on the economic outlook presented in the Summary of Economic Projections.
In the context of the recent German debt restructuring agreement, which includes a €500 billion infrastructure fund, optimism remains around Eurozone growth. Meanwhile, economic data shows US Retail Sales for February increased by only 0.2%, falling short of the 0.7% expectation.
The Euro is also emboldened by increased hopes for a Russia-Ukraine peace agreement. However, potential tariffs between the US and EU pose risks for the Euro as President Trump has threatened substantial tariffs on European products.
The technical analysis of EUR/USD remains positive, holding above the 200-day Exponential Moving Average. The pair has broken above previous resistance levels, and the 14-day Relative Strength Index indicates strong bullish momentum.
The movement of the euro against the dollar, now approaching 1.0900, suggests traders are taking positions ahead of the Federal Reserve’s decision this Wednesday. Markets widely expect US interest rates to remain at 4.25%-4.50%, but the spotlight will be on the central bank’s updated economic outlook, released in the Summary of Economic Projections. That report will indicate how policymakers view inflation, growth, and employment in the months ahead, which could lead traders to adjust their expectations for future rate moves.
There’s also an optimistic sentiment surrounding economic prospects in the Eurozone. The recent restructuring of German debt includes a €500 billion package dedicated to infrastructure, an injection that is expected to support long-term investment and growth. That said, traders will need to monitor whether this plan translates into immediate improvements in economic performance or if momentum behind the euro fades.
On the other side of the equation, US economic data has provided mixed signals. Retail sales for February increased by just 0.2%, falling well below the expected 0.7% rise. Weak consumer spending could strengthen the case for an eventual rate cut by the Fed, which may in turn exert further downward pressure on the dollar. If economic data in the coming weeks continues on this trajectory, it could shift sentiment further in favour of the euro.
Turning to geopolitics, the single currency has found additional support due to an improved outlook regarding potential peace talks between Russia and Ukraine. Any development in that direction could ease concerns about energy security in Europe, which would likely maintain a sense of support behind the euro. However, there are threats to this optimism. The possibility of new tariffs between the US and the EU remains in the background. Trump’s recent stance suggests he would impose substantial duties on European products should he return to office, which could create downside risks.
From a technical perspective, price action continues to point to strength. The fact that the pair is trading above the 200-day Exponential Moving Average is an indication that bullish momentum remains intact. Furthermore, since prior resistance levels have been overcome, traders will likely watch for signs of consolidation before considering further upside potential. The 14-day Relative Strength Index remains in supportive territory, reinforcing this outlook.
As this week progresses, markets will need to balance economic releases, geopolitical developments, and central bank decisions. Traders watching this pair should remain attentive to any shifts in tone from Fed officials or unexpected economic data from either side of the Atlantic.
