The EUR/USD pair found fresh demand as the US Dollar's recovery showed signs of fading. This development comes amidst a global stock sell-off, fueled by investor concerns over US President Trump's tariff plans. The currency pair has been buoyed by the latest German IFO survey results, which exceeded market expectations, though the anticipated rate cuts by the European Central Bank (ECB) may limit further gains.
In January, the German IFO Business Climate Index rose to 85.1, surpassing the previous month's figure of 84.7 and exceeding forecasts. This positive sentiment was further supported by the IFO Current Economic Assessment Index, which increased to 86.1, beating the expected 85.4 reading. However, the IFO Expectations Index saw a slight decline to 84.2 from December's 84.4, although it still came in above the anticipated 84.
The EUR/USD pair has managed to hold onto its recovery gains following the upbeat German IFO survey results. As of today, the pair is trading 0.05% higher at 1.0485. Notably, the ECB's rate cut expectations seem to limit the currency's rebound potential, with market participants anticipating four interest rate cuts this year.
Meanwhile, the US Federal Reserve is also expected to implement a series of interest rate cuts, with two reductions of 25 basis points each projected for the year. This anticipation of monetary easing in both the Eurozone and the US has created a cautious environment among capital market participants.
The ongoing global stock sell-off is a significant backdrop to these developments. Investors remain wary of President Trump's tariff plans, which have continued to create uncertainty in international markets. This wariness has contributed to the fading recovery of the US Dollar, providing room for the EUR/USD pair to find renewed demand.