Recent easing of optimism regarding a swift ceasefire in Ukraine has affected the euro’s performance. The current level of EUR/USD is approximately 1% above its short-term fair value, which is estimated closer to 1.07.
The two-year swap rate gap suggests a bearish outlook for the currency pair. However, a busy week of data could allow the euro to gain some traction from existing fiscal optimism.
Euro Momentum And Ceasefire Hopes
EUR/USD is anticipated to rise above 1.090 by Wednesday, with potential softness towards the week’s end as market participants adopt a defensive stance ahead of the 2 April tariff event. There is doubt over whether the pair will surpass 1.10.
The pared-back hopes for an immediate ceasefire in Ukraine have weighed on sentiment, leaving the euro slightly stretched above fair value. With EUR/USD nearly 1% over the estimated equilibrium near 1.07, traders are left assessing whether upside momentum has further room to run.
The gap in two-year swap rates points towards headwinds, reinforcing concerns that the pair may struggle to hold onto gains. Still, the upcoming data-heavy week could offer a short-term lift, particularly as financial markets remain broadly upbeat.
Market Outlook And Key Levels
We expect movement above 1.090 by midweek, supported by speculative positioning and residual optimism. However, as the days progress, defensive trading ahead of the 2 April tariff event could dampen enthusiasm. The psychological 1.10 threshold remains a tough hurdle, and for now, there’s little to suggest an easy break above.
Given these factors, staying nimble in response to shifting expectations becomes ever more important.
