The euro weakened slightly to approach $1.13 on Wednesday, pulling back from its highest levels since January 2022, after the European Central Bank cut borrowing costs for the sixth consecutive time, as widely expected.
Euro weakens after ECB
The ECB lowered its key deposit rate by 25 basis points to 2.25%, marking the lowest level since early 2023 and signaling a shift in tone by removing its previous reference to maintaining “restrictive” monetary policy. The move was interpreted by markets as a dovish step, contributing to the euro’s mild pullback.
Nonetheless, the common currency remains on a strong footing, having gained nearly 5% against the US dollar in April alone. The euro’s strength is underpinned by a growing reassessment of the dollar’s dominance in global finance, with investors increasingly diversifying away from US assets amid mounting fiscal and trade policy uncertainty in Washington.
Trade war news
Additionally, geopolitical shifts and rising security concerns in Europe have fueled expectations of a structural increase in defense spending, particularly from Germany, which is seen as supportive for the euro through increased fiscal stimulus and regional economic resilience.
Traders are now turning their attention to upcoming comments from ECB officials and incoming inflation data across the bloc, which may offer further clues on the central bank’s policy path going into the second half of the year.
