At the time of writing EUR/USD is hovering around 1.0830 during the mid-European session. USD/JPY is on a decidedly firmer footing as traders look for market mover to new directional impetus. The Euro’s progress comes even as the German IFO – Business Climate index printed a smaller-than-forecast improvement in March. The currency pair is currently sailing in challenging waters, characterized by the US Dollar’s recent rebound and a multitude of economic indicators shaping their path.
On Tuesday, EUR/USD continued to stay on the firm side near 1.2950 during the European morning. Part of this strength can be explained by the US Dollar’s recent decline after the latest tariff-related news. The Euro then skyrocketed as this all played out, exposing the complicated relationship between currency movements and trade conflict.
Additionally, the currency pair is affected by the backdrop of war, especially the peace agreement between Russia and Ukraine, which continues to remain fragile. These developments have introduced a great deal of uncertainty into the market, weighing heavily on traders’ sentiment and EUR/USD surges. Moreover, recently released US President Donald Trump comments and US Consumer Confidence data have played a key role in determining the currency pair’s direction.
Market participants are eagerly looking at EUR/USD as speculations increase that the Federal Reserve will restart its rate-cutting cycle in the near future. At least among the peanut gallery, this speculation is gaining traction. The Fed’s preferred inflation measure, Core PCE, is providing key indications of what monetary policymakers should do next. Traders have been particularly on edge when it comes to US macroeconomic data and Fed allusions to interpret whether or not interest rates will be lowered.
Those vagaries are adding to headline market volatility and are causing mixed economic signals on both sides of the Atlantic to influence EUR/USD’s direction. The German IFO – Business Climate index came in lower than forecast. It is still a key indicator for traders assessing the Eurozone’s economic condition. The US Dollar’s performance throughout the European session can largely help set the tone for affecting the EUR/USD pair. Market sentiment continues to move and change with each passing data point and geopolitical event.