The euro fell sharply, dropping over 1% to $1.024, approaching its lowest point since November 2022.
Euro plunges on trade war fears
This decline reflects growing anxieties in Europe stemming from new trade tariffs. The imposition of tariffs on Mexican and Canadian imports, along with levies on Chinese goods, has negatively impacted market confidence. Threats of tariffs on the EU, citing trade imbalances, have further heightened concerns. While retaliatory measures have been taken and are possible, the EU has pledged a strong response to any such actions.
Euro weakens on ECB policy, inflation concerns
This uncertainty, coupled with the European Central Bank's accommodative monetary policy and potential for further rate reductions, has put significant downward pressure on the euro. Despite a recent interest rate cut by the ECB, Euro Area inflation rose to 2.5% in January, exceeding expectations, with core inflation remaining steady.
