EUR/USD surges as US Bessent favors lower interest rates
- EUR/USD demonstrates strength around 1.0500 as a positive development towards ending the war in Ukraine has improved the Euro’s appeal.
- The ECB is expected to cut interest rates by 25 bps on Thursday.
- US President Trump imposed 25% tariffs on Canada and Mexico and an additional 10% on China.
EUR/USD refreshes a 12-week high slightly above 1.0550 in Tuesday’s North American session. The major currency pair strengthens as the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, extends its downside to near 105.90, the lowest level seen in almost three months.
The Greenback weakens further as United States (US) Treasury Secretary Scott Bessent said that they are set on bringing interest rates "down," a Reuters report. His comments are unfavorable for the US Dollar as lower US interest rates result in a decline in US Treasury yields. 10-year US bond yields are down almost 1% to near 4.14%.
Lately, traders have raised Federal Reserve (Fed) dovish bets after an array of weak US economic data. The likelihood for the Fed to reduce interest rates in June has increased to 87% from 69% recorded a week ago, according to the CME FedWatch tool.
Earlier in the day, the US Dollar was already underperforming even though US President Trump confirmed tariffs on Canada and Mexico and additional levies on China to come into effect on Tuesday.
President Trump is set to impose 25% tariffs on his North American partners and has slapped an additional 10% on China for pouring fentanyl into the US. Trump said to reporters on Monday, “No room left for Mexico or for Canada.” He added, “The tariffs, you know, they’re all set. They go into effect tomorrow.”
In retaliation, China has also imposed tariffs on various agricultural imports from the US, which will take effect on March 10. The US's imposition of tariffs on China and its neighbors has confirmed a global trade war, which is unfavorable for the global economic outlook.
Investors expect Trump’s tariff agenda will be inflationary for the US economy, assuming that the impact of higher levies will be borne by US importers, who would be forced to pass on higher input costs to consumers.
On the economic data front, investors await a slew of US labor market-related data and the ISM Services PMI release this week. Investors will pay close attention to the US economic data as it will influence market speculation about the Federal Reserve’s (Fed) monetary policy outlook.
Daily digest market movers: EUR/USD strengthens, ECB policy in focus
- EUR/USD surges to near 1.0550 on Euro's (EUR) outperformance. The Euro gains as European leaders, including Ukrainian President Volodymyr Zelenskyy, agreed to structure a peace plan to end the three-year-long war in Ukraine. Europe’s readiness to stop the massacre in Ukraine has improved the Euro’s (EUR) appeal, assuming that a truce between Russia and Kyiv would restore the fractured supply chain of the Eurozone.
- This week, the major trigger for the Euro is the European Central Bank’s (ECB) monetary policy decision, which is scheduled for Thursday.
- According to the February 19-27 Reuters poll, the ECB will cut its Deposit Facility Rate by 25 basis points (bps) to 2.5%. This would be the fifth interest rate cut by the ECB in a row, the sixth since the central bank started its easing cycle in June 2024. Dovish votes for the ECB’s interest rate decision were prompted by fears that United States (US) President Donald Trump’s tariff agenda will damage the Eurozone economic growth.
- Additionally, ECB officials have remained confident that inflationary pressures will sustainably return to the desired rate of 2% this year.
- Investors will pay close attention to the monetary policy statement and ECB President Christine Lagarde’s press conference after the policy decision. Market participants want to know when the ECB will return to a neutral stance and how Trump’s tariff agenda will impact the inflation outlook.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.65% | -0.34% | -0.70% | -0.56% | -0.23% | -0.36% | -0.86% | |
| EUR | 0.65% | 0.30% | -0.03% | 0.09% | 0.41% | 0.28% | -0.25% | |
| GBP | 0.34% | -0.30% | -0.36% | -0.22% | 0.11% | -0.02% | -0.54% | |
| JPY | 0.70% | 0.03% | 0.36% | 0.15% | 0.49% | 0.35% | -0.17% | |
| CAD | 0.56% | -0.09% | 0.22% | -0.15% | 0.32% | 0.20% | -0.33% | |
| AUD | 0.23% | -0.41% | -0.11% | -0.49% | -0.32% | -0.12% | -0.65% | |
| NZD | 0.36% | -0.28% | 0.02% | -0.35% | -0.20% | 0.12% | -0.52% | |
| CHF | 0.86% | 0.25% | 0.54% | 0.17% | 0.33% | 0.65% | 0.52% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Technical Analysis: EUR/USD aims to extend upside to near 1.0600
EUR/USD trades firm near 1.0550 in North American trading hours on Tuesday. The major currency pair trades above the 20-day Exponential Moving Average (EMA), which is around 1.0440, suggesting that the near-term trend is bullish.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, which indicates a sideways trend.
Looking down, the February 10 low of 1.0285 will act as the major support zone for the pair. Conversely, the December 6 high of 1.0630 will be the key barrier for the Euro bulls.
Economic Indicator
ECB Rate On Deposit Facility
One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.
Read more.Next release: Thu Mar 06, 2025 13:15
Frequency: Irregular
Consensus: 2.5%
Previous: 2.75%
Source: European Central Bank
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
