The euro traded around $1.045 as traders assessed the impact of rising defense expenditures, escalating geopolitical tensions, and potential trade disruptions linked to U.S. tariffs.
Euro hovers at 1.04 against US dollar
Concerns grew as Washington signaled plans to scale back support for Ukraine while engaging in direct negotiations with Russia, notably excluding both Ukraine and European nations from the talks. In response, European leaders convened in Paris to explore alternative strategies for sustaining aid to Ukraine, but the informal meeting concluded without concrete policy measures. Analysts estimate that strengthening Europe's defense capabilities and maintaining long-term assistance to Ukraine could cost the region’s largest economies approximately $3.1 trillion over the next decade, putting further strain on already stretched fiscal budgets.
Trump confirms tariffs plans
Meanwhile, US President Donald Trump reaffirmed his intention to impose a 25% tariff on key European exports, including automobiles, semiconductors, and pharmaceuticals, starting April 2. The move is expected to place significant pressure on European car manufacturers, particularly Germany's auto industry, which relies heavily on U.S. sales. Some analysts warn that retaliatory measures from the European Union could further escalate trade tensions, potentially disrupting supply chains and dampening economic growth.
Eyes on ECB
On the monetary policy front, the European Central Bank is widely expected to begin easing its stance, with a 25-basis-point deposit rate cut anticipated at each of the next three meetings. This would bring the rate down from its current level of 2.75%, with growing speculation that it could fall below 2% by 2026. However, persistent inflationary pressures and uncertainty surrounding global economic conditions may complicate the ECB’s path to rate normalization, leaving investors closely watching upcoming policy signals.
