Euro at four-month highs amid hopes for Ukraine ceasefire

The euro traded above $1.09, reaching a fresh four-month high, as traders reacted positively to signs of a potential ceasefire in Ukraine. Kyiv agreed to a U.S.-brokered 30-day truce with Russia as part of a broader deal with the Trump administration to unfreeze military aid and restore intelligence-sharing agreements.

Euro at four-month highs amid hopes for Ukraine ceasefire

The proposal will now be presented to Russian President Vladimir Putin for approval, raising hopes for a de-escalation of the conflict. The euro's strength reflects growing investor confidence that reduced geopolitical risks could support economic stability in the region. Meanwhile, trade tensions between the U.S. and the European Union flared after Washington imposed a 25% tariff on steel and aluminum imports from key allies, including Canada, Australia, and the EU. In response, the European Commission announced retaliatory tariffs on €26 billion worth of U.S. goods, set to take effect in April. The countermeasures will target a wide range of American exports, including steel, aluminum, textiles, leather goods, poultry, beef, and eggs, further straining transatlantic trade relations. Analysts warn that prolonged trade disputes could weigh on economic growth and disrupt supply chains, particularly in the manufacturing and industrial sectors.

EU defense spending boosts euro

The euro’s rally has also been supported by expectations that increased defense spending across the bloc will provide a boost to economic activity, countering some of the uncertainty caused by trade tensions. Additionally, signs that the European Central Bank (ECB) may be approaching the end of its rate-cutting cycle have contributed to bullish sentiment. With inflation in the eurozone remaining relatively resilient and policymakers signaling a cautious approach to further monetary easing, traders are increasingly positioning for a scenario in which ECB interest rates remain stable or even begin to rise sooner than previously expected.

Focus on upcoming macro data

Looking ahead, investors will be closely monitoring economic data releases, including upcoming inflation reports and GDP growth figures, to gauge the strength of the eurozone economy. Any indications of persistent inflationary pressures or stronger-than-expected economic activity could further reinforce expectations that the ECB will maintain a more hawkish stance, providing additional support for the euro.