The euro declined to $1.044, weighed down by expectations of a 25-basis-point rate cut by the European Central Bank (ECB) as it continues its dovish policy stance following four rate reductions in 2024.
Euro down against dollar
Investors are also keenly watching for any forward guidance from the ECB regarding its monetary strategy for 2025, with markets broadly anticipating further rate cuts in the months ahead to combat sluggish growth and persistently low inflation in the eurozone.
Meanwhile, the Federal Reserve is expected to maintain its current interest rate levels, bolstering the appeal of the U.S. dollar as the divergence in monetary policy between the two central banks widens.
Sentiment hit by Trump's tariffs fears
Adding to the dollar’s strength, U.S. President Donald Trump's comments about imposing broader tariffs on key sectors, including semiconductors, steel, and automobiles imported from Canada and Mexico, fueled safe-haven demand for the greenback. Concerns over the economic impact of such tariffs and escalating trade tensions have further pressured the euro, as the eurozone's export-driven economies remain vulnerable to global trade disruptions.
