EURUSD rises to near 1.0480 on positive market sentiment due to a variety of factors.
EURUSD extended its winning streak to the fourth trading session on Friday. The main currency pair hits a new fortnight high around 1.0480 and looks to extend its gains to near psychological barrier at 1.0500. The shared currency pair is up as demand for risky assets rises due to a number of tailwinds.
US President Donald Trump’s reciprocal tariffs are unlikely to be implemented before April 1.
Market mood becomes positive for riskier assets as the United States imposes reciprocal tariffs (US) President Donald Trump is unlikely to go into effect before April 1. On Thursday, Trump directed treasury and commerce chiefs to focus on reciprocity. Later, Commerce Secretary nominee Howard Lutnick indicated the president will be ready to implement new tariffs by April 1. This scenario reduced fears of an instant global trade war, as investors expected Trump to announce matching tariffs on Thursday itself.
Investors believe US trading partners to have enough time to discuss prospective tariffs with Trump, reducing the extent of the trade war’s negative repercussions.
The ECB predicted to lower interest rates further, while the Fed expected to continue its tight posture.
Apart from the delay in reciprocal tariff imposition, optimism about the Russia-Ukraine peace has provided significant relief to the Euro (EURUSD). An end to a three-year-long war fix the energy crisis and supply chain bottlenecks in the Eurozone to a great extent. In spite of multiple tailwinds behind Euro’s strength, market participants worry that expectations of widening rate differentials between the European Central Bank (ECB) and the Federal Reserve (Fed) could push the shared currency on the backfoot again.
A slew of ECB officials have been comfortable with expectations that the central bank will reduce its Deposit Facility rate three times more this year. The ECB cut its interest rates by 25 basis points (bps) to 2.75% last month. On Thursday, ECB policymaker and Croatian central bank Governor Boris Vujčić said that the market pricing in three more interest rate cuts this year is something “not unreasonable”. Vujčić added that the ECB The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, has reached a new four-week high, despite a delay in the implementation of Trump’s reciprocal tariffs and hopes for peace between Russia and Ukraine. rates steady in the next three policy meetings. There is a nearly 50% possibility that the Fed will decrease interest rates at its July meeting.
Traders are confident that the Fed will maintain a restrictive interest rate stance for longer.
Traders are confident that the Fed will maintain a restrictive interest rate stance for longer amid persistent inflationary pressures and strong labor demand.
This week, Fed Chair Jerome Powell said in his two-day testimony before Congress that the central bank can maintain “policy restraint for longer” if the economy remains strong and “inflation does not move toward 2%.”
Investors will focus on the January Retail Sales data from the United States, which will be released at 13:30 GMT on Friday. The US Census Bureau expected to report that Retail Sales, a key measure of consumer spending, declined by 0.1% in January’s expansion followed a 0.4% increase in December.
