The euro hovered near the $1.14 mark on Monday, its strongest level since late January 2022, after notching a 3.6% weekly gain. The surge was fueled by intensifying global trade tensions and deepening uncertainty around U.S. tariff policy, which have rattled markets, triggered risk-off sentiment, and undermined confidence in U.S. assets, pushing investors toward alternative currencies like the euro.
Euro at over three-year high
Over the weekend, U.S. President Trump granted temporary tariff exemptions on Chinese imports of smartphones and computers, providing some short-term relief for global tech supply chains. However, he also signaled that new tariffs on semiconductors would be announced later in the week, with a final decision on potential phone levies still pending. The contradictory and evolving nature of these announcements has created significant volatility in currency and equity markets, as traders struggle to interpret the long-term direction of U.S. trade policy.
The euro has also benefited from relative policy clarity in the Eurozone. The European Central Bank is set to hold its next policy meeting on Thursday, with markets widely expecting a 25 basis point rate cut aimed at supporting slowing economic growth. While easing is largely priced in, investor focus will be on ECB President Christine Lagarde's remarks regarding the implications of U.S. trade policies for the Eurozone economy, as well as any hints about the trajectory of further rate moves.
Eyes on ECB moves
Additional euro strength may be capped if the ECB adopts a dovish tone or signals further accommodation, but for now, the euro remains a favored hedge against dollar weakness and rising geopolitical uncertainty. Investors will also monitor upcoming Eurozone data, including industrial production and consumer confidence figures, for signs of how external trade pressures are filtering into the bloc’s economic outlook.
