EUR/USD struggled on Wednesday, remaining confined between 1.0900 and 1.1000 despite a general recovery in risk appetite following tariff policy announcements from the US government. President Trump stated his administration would delay certain tariffs for 90 days, but a 10% levy persists.
Market expectations for rate cuts have diminished, with traders anticipating a total of 75 basis points from the Federal Reserve for the year. Analysts forecast a quarter-point cut in June, but uncertainty around tariffs may prolong the Fed’s wait-and-see approach until at least September.
Upcoming Inflation Data
Upcoming inflation data includes the Consumer Price Index on Thursday and Producer Price Index, along with the University of Michigan Consumer Sentiment Index results on Friday. These figures will serve as essential benchmarks for the year ahead.
EUR/USD recently ended a two-day decline at around 1.0900, facing thin buying pressure and potential for further declines towards the 200-day Exponential Moving Average near 1.0700. A resistance zone exists between 1.1100 and 1.1000.
The Euro is the currency for 19 Eurozone countries, representing 31% of foreign exchange transactions in 2022, with an average daily turnover exceeding $2.2 trillion. The EUR/USD currency pair accounts for approximately 30% of all forex transactions.
The European Central Bank (ECB) governs monetary policy for the Eurozone, primarily focusing on maintaining price stability through interest rate adjustments. Higher interest rates typically strengthen the Euro by attracting foreign investment.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices, influences the ECB’s decisions and, subsequently, the Euro’s value. Strong economic indicators tend to bolster the Euro, whereas weak data can lead to declines.
The Trade Balance affects the Euro as well; a surplus suggests strong exports and increases currency value due to higher demand. Conversely, a negative balance may weaken the Euro.
Market Conviction And Reactivity
With EUR/USD showing limited movement between the psychologically important 1.0900 and 1.1000 levels, it’s apparent that the pair is stuck in a period of indecision. Despite a mild return in appetite for riskier assets following tariff-related developments from Washington, the major currency cross has yet to react with any real conviction. While a delay in some import levies may have eased immediate concerns, a residual 10% tariff maintains a layer of uncertainty that’s hard to ignore.
More telling, however, is how rate market participants have recalibrated their outlook on potential action from the Federal Reserve. Shortly after Trump’s remarks, expectations for aggressive rate cuts eased off. Where previously the market had been pricing in deeper easing, consensus is now shifting to roughly 75 basis points in reductions over the course of the year. The earliest change now looks to be in June, although mounting ambiguity over trade developments may push policymakers to remain patient until at least September.
Upcoming economic data releases carry outsized importance given this delay in rate trajectory clarity. We are specifically watching for Thursday’s Consumer Price Index (CPI) and Friday’s Producer Price Index (PPI), paired with the University of Michigan’s Consumer Sentiment survey. These releases serve as guideposts—not just for monetary authorities but for all participants seeking visibility into how demand and pricing power are adjusting under the current macro backdrop.
Technically, the spot rate offers little encouragement for highly directional players. Recent weakness found only a shallow base near 1.0900, and the rebound lacked energy. If price action remains muted, we wouldn’t be surprised to see a drift towards the 200-day Exponential Moving Average near 1.0700, which ticks the box as a familiar area of structural demand. Meanwhile, resistance remains stiff between 1.1000 and 1.1100, slowing any attempts to lift the pair.
On a more structural note, demand for the Euro—still the second-most traded currency globally—is tied tightly with the health of the bloc’s economy. The European Central Bank has stayed committed to its inflation target, and policy settings reflect this intent. Higher interest rates typically lend strength to the Euro by increasing the return on assets denominated in the currency, but this is contingent upon strong domestic data and an absence of external threats.
We’ve also been keeping regular tabs on the Harmonised Index of Consumer Prices, the ECB’s preferred inflation metric. When this climbs, it sets the stage for more forceful tightening from the central bank. But if the readings underperform, current monetary policy may simply remain unchanged for longer.
Also worth spotlighting is the euro area’s Trade Balance. A surplus here often reflects rising foreign demand for Eurozone goods, which indirectly pushes up demand for the currency. A widening deficit, on the other hand, tends to exert downward pressure, and results can often swing quickly depending on the performance of major exporters within the bloc.
Over the next several weeks, those dealing with short-dated contracts may consider keeping a close eye on how rate differentials adjust in line with market shifts. Particularly as US data either validates or challenges current pricing for future Fed decisions.
It’s a period that favours reactivity over conviction, as we continue to digest incoming macro indicators and adjust forward-looking risk accordingly.
