Euro remains below $1.14 as traders digest key data

The euro hovered just below the $1.14 mark as investors digested a wave of fresh economic data and closely monitored ongoing trade developments between the U.S. and its major trading partners.

Euro remains below $1.14 as traders digest key data

The single currency has been buoyed by stronger-than-expected growth data out of the Eurozone, where the economy expanded by 0.4% in the first quarter of 2025—doubling the pace of the previous quarter and outperforming market expectations of 0.2%. The positive surprise reinforced a narrative of relative resilience in the European economy, even as external uncertainties mount. Among the bloc’s largest economies, Germany posted a modest 0.2% gain, in line with forecasts, driven by improved consumer spending and public investment after the government relaxed fiscal rules. Meanwhile, Spain and Italy exceeded expectations with growth of 0.6% and 0.3%, respectively, supported by tourism, household consumption, and targeted government spending. France, however, underperformed with a subdued 0.1% expansion, weighed down by sluggish business investment and persistent trade deficits.

French consumer price inflation held steady

On the inflation front, French consumer price inflation held steady at 0.8% year-on-year in April, in line with market expectations, suggesting price pressures remain tame. Meanwhile, preliminary data from Germany pointed to continued disinflationary trends in headline prices, despite a moderate increase in core inflation to 2.9%, reflecting stronger service sector costs and wage growth. These mixed signals underscore the challenge facing the European Central Bank, which must balance softening inflationary trends against a potentially re-accelerating core and a still-uncertain economic outlook. Despite lingering inflation uncertainty and divergent national trends, the euro was on track for a robust monthly gain of over 5% against the U.S. dollar—the strongest monthly performance since mid-2020. The rally has been fueled in part by a growing loss of confidence in U.S. assets, as recent moves by the Trump administration to escalate tariff measures have raised fears of supply chain disruptions, weaker growth, and reduced foreign capital inflows into the U.S. Treasury market.

Eyes on central banks

Speculation is also mounting that the Federal Reserve may have to reconsider its policy stance amid deteriorating economic indicators, including a surprise contraction in Q1 GDP and softer labor market data, both of which stand in contrast to relatively more stable signals from the Eurozone. As a result, investors have begun to rotate toward euro-denominated assets, betting on policy divergence and a more favorable risk-reward profile in European markets.