The euro increased to $1.031, recovering slightly from a three-week low, as investors reacted to the EU’s strong opposition to US tariffs on European steel and aluminum.
Euro gains amid EU-US tariff tensions
European Commission President Ursula von der Leyen denounced the tariffs as "unjustified" and pledged firm countermeasures. At the same time, German Chancellor Olaf Scholz warned that Europe would respond "within an hour" if the tariffs were imposed. The dispute escalated after US President Donald Trump announced a 25% tariff on steel and aluminum imports on Monday, raising concerns about a potential trade war between the two economic blocs.
Meanwhile, the European Central Bank recently cut interest rates. It signaled the likelihood of further easing in March, with markets now anticipating the deposit rate to decline to 1.87% by year-end. Weaker economic data in the eurozone and persistently sluggish inflation have increased pressure on the ECB to continue its accommodative stance.
US jobs data supports Fed's rate hold
In contrast, strong US jobs data has reinforced expectations that the Federal Reserve will maintain its current policy, as the robust labor market supports the case for keeping interest rates steady. The diverging monetary policies between the ECB and the Fed continue to shape investor sentiment, adding to uncertainty in currency markets.
