EUR/USD rose to around 1.1080, gaining 0.67% during the early European session on Friday. This increase comes ahead of the US non-farm payroll (NFP) report and following concerns over a potential global trade war.
US President Donald Trump announced tariffs of at least 10% on imports and a 20% tariff specifically on European Union goods, effective April 9. These developments contribute to fears of a global economic slowdown, pushing the US Dollar lower.
Interest Rate Expectations
Expectations for a 25 basis point rate cut by the European Central Bank (ECB) in April are increasing, with money markets pricing in nearly 80% odds. Economic data releases on German Factory Orders and US employment figures are anticipated later in the day.
The Eurozone benefits from strong global trade performance and lower tariffs, as reflected in the recent positive trends. However, ongoing uncertainty surrounding trade may impact the Euro in the near term.
The Euro is the currency for 19 countries in the Eurozone and is the second most traded currency globally. In 2022, it accounted for 31% of all foreign exchange transactions.
The European Central Bank (ECB) oversees monetary policy and interest rates for the Eurozone. Maintaining price stability remains its primary mandate, influencing the value of the Euro based on interest rate expectations.
Economic indicators such as inflation data, GDP, and employment statistics are key in assessing the Euro’s performance. A strong economic outlook generally supports the Euro, while weak data may lead to depreciation.
The Trade Balance
The Trade Balance is another vital measure for the Euro, reflecting the difference between exports and imports. A positive balance tends to strengthen a currency, while a negative balance may weaken it.
With EUR/USD now hovering around 1.1080, the pair exhibits a stronger tone than in recent weeks. The near 0.7% gain reflects a move that is not solely technical in nature but also rooted in shifting expectations. The downward pressure on the US Dollar, following external trade announcements, has offered the Eurospace to recover ground. These changes stem from concrete moves in policy rather than speculative noise.
Trump’s decision to apply tariffs—10% broadly and 20% targeting the EU—has injected fresh volatility into currency markets. Set to begin April 9, these measures, which are showing up in investor risk sentiment, have prompted a pullback from Dollar assets. Markets often interpret forced trade constraints as a drag on growth expectations. In this case, the impact leans Dollar-negative, given concerns it may reduce international demand for US goods and heighten costs at home. This has historically triggered outflows from the currency, and we’re already seeing that pattern resurface.
At the same time, attention in Europe has turned to the ECB, where a 25 basis point rate cut in April is becoming increasingly accepted as the likely outcome. With market-based expectations now approaching 80%, forward guidance will be watched closely. The ECB’s role is centred on keeping prices stable, and shifts in interest rates are its primary tool. So, when inflation isn’t holding near their target, and employment or growth data comes up short, rate reductions become more probable. Recent German Factory Orders are yet to be released, and their impact could be sharp if outcomes deviate from forecasts.
Data points from both sides of the Atlantic could lead to short bursts of volatility. For example, today’s US employment figures, if surprisingly strong, might support the Dollar and limit further upside in EUR/USD. On the other hand, weaker numbers could add to the current bearish Dollar tone. We’ll monitor these releases not for the headline alone, but for revisions and participation rate trends, which are frequently overlooked but often steer the market reaction more than anticipated.
The Euro has been underpinned in part by favourable trade dynamics, especially when tariffs are low and global growth is expanding. Germany, the Eurozone’s industrial engine, relies heavily on such open flows. Should global trade become restricted, the single currency may lose further momentum. That’s why traders need to keep an eye not just on policy moves, but on how they directly affect exports and manufacturing outlooks.
The Euro’s share in global foreign exchange turnover remains elevated, second only to the Dollar. It serves as a kind of weather vane for broader market sentiment. Sharp shifts in risk appetite often pass through this pair, as it balances the diverging economic paths of the EU and US.
We often treat economic indicators as puzzle pieces. Inflation, GDP, and employment each carry different weight depending on what story the market is currently focused on. At the moment, inflation is relatively subdued, and growth in the Eurozone has been patchy. As long as those figures don’t jump meaningfully, the ECB is unlikely to shift course. That holds implications for forward rate expectations, which are tightly linked to spot EUR/USD.
Another area to watch: trade flows. A consistently positive trade balance supports demand for the single currency. If the Eurozone nations export more than they import, this lifts demand for the Euro as foreign buyers need it for purchase settlements. A deteriorating surplus would be worrisome and could push the Euro lower, especially if tied to broader weakness in industrial output or demand from key partners like China.
Looking through the next few weeks, traders might consider focusing more on how monetary policy is being anticipated than on what’s directly announced. Markets typically move in advance of confirmed decisions, adjusting positions based on probability changes. The key is to spot those shifts early, watch how positioning lines up, and plan accordingly.
