- EUR/USD gains traction around 1.1370 in Friday’s early Asian session.
- ECB cut interest rates to their lowest level since late 2022.
- Fed’s Powell warned that Trump’s tariffs could lead to a challenging scenario for the US central bank.
The EUR/USD pair attracts some buyers to near 1.1370 during the early Asian session on Friday. The concerns over the economic impact of tariffs continue to drag the US Dollar (USD) lower against the Euro (EUR). Traders will closely monitor the developments surrounding US trade talks. Trading volume is likely to be lightened on Good Friday.
The European Central Bank (ECB) cut interest rates for the third time this year on Thursday, bringing its main interest rate to 2.25% in response to slowing growth and US President Donald Trump’s tariffs. ECB President Christine Lagarde said during the press conference that US tariffs on EU goods, which had increased from an average of 3% to 13%, were already harming the outlook for the European economy.
Analysts believe that further rate cuts in June are still highly possible and that only a major easing in trade tensions would convince the ECB to pause. “It has a dovish tone. Focus has shifted to looking at the downside risk to the growth outlook rather than the upside risk to inflation,” said Kirstine Kundby-Nielsen, FX analyst at Danske Bank. The dovish stance of the ECB could weigh on the shared currency in the near term.
Across the pond, the Federal Reserve (Fed) Chair Jerome Powell turned hawkish, saying that a weak economy and high inflation could conflict with the Fed’s goals and make a stagflationary scenario possible. His comments reduced the likelihood of a Fed rate reduction in June, which lifts the US Dollar (USD) against the EUR. Money market traders have priced in nearly 86 bps of Fed rate cuts by the end of 2025, with the first cut expected in July, according to the CME FedWatch tool.
