EUR/USD: Dollar Stabilizes as Euro Momentum Stalls Above 1.14
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Despite recording the weakest start to a presidential term since the 1970s—with the S&P 500 down over 7% and the U.S. dollar index lower by 9% in the first 100 days of Donald Trump’s second term—recent market dynamics suggest a gradual stabilization in U.S. assets. The dollar, in particular, has begun to recover some ground, supported by signs of progress in trade discussions and a partial retreat from the earlier aggressive stance on tariffs.
Economic data remains fragile. Revisions to U.S. GDP expectations for the first quarter have turned sharply lower, with Bloomberg forecasting 0.3% growth and the Atlanta Fed projecting a contraction of 1.5%. Soft prints on consumer confidence and job openings have added to the cautious tone. Nonetheless, the narrative that the administration’s early setbacks could be part of a broader strategic approach—potentially aimed at improving the U.S. position in global trade—has started to gain some traction among investors.
In parallel, market-based indicators suggest that the negative impact of tariff uncertainty may be moderating. Equities have stabilized following recent policy adjustments, such as the easing of proposed auto tariffs, while a decline in commodity prices has reduced inflationary pressures, adding support to risk assets and indirectly limiting the upside for EUR/USD. The euro-dollar pair has struggled to maintain momentum beyond the 1.14 area, with repeated attempts to break higher meeting selling pressure. This suggests that market participants remain cautious in pricing further euro strength without a clearer improvement in global risk sentiment or more decisive signals from the European Central Bank. The return of demand for U.S. assets, particularly equities, continues to anchor the dollar, making a sustained move above recent resistance levels less likely in the immediate term.
As the week unfolds, focus remains on the upcoming macro releases and central bank communications, both of which could shape near-term expectations for monetary policy divergence. In this context, EUR/USD appears to be entering a consolidation phase, where any retracement toward the 1.13 area may offer a base for reassessment. However, the medium-term outlook will depend on whether the U.S. economy can avoid a deeper slowdown and whether the perceived policy missteps of the first quarter evolve into longer-term structural shifts that favor the greenback.
Economic data remains fragile. Revisions to U.S. GDP expectations for the first quarter have turned sharply lower, with Bloomberg forecasting 0.3% growth and the Atlanta Fed projecting a contraction of 1.5%. Soft prints on consumer confidence and job openings have added to the cautious tone. Nonetheless, the narrative that the administration’s early setbacks could be part of a broader strategic approach—potentially aimed at improving the U.S. position in global trade—has started to gain some traction among investors.
In parallel, market-based indicators suggest that the negative impact of tariff uncertainty may be moderating. Equities have stabilized following recent policy adjustments, such as the easing of proposed auto tariffs, while a decline in commodity prices has reduced inflationary pressures, adding support to risk assets and indirectly limiting the upside for EUR/USD. The euro-dollar pair has struggled to maintain momentum beyond the 1.14 area, with repeated attempts to break higher meeting selling pressure. This suggests that market participants remain cautious in pricing further euro strength without a clearer improvement in global risk sentiment or more decisive signals from the European Central Bank. The return of demand for U.S. assets, particularly equities, continues to anchor the dollar, making a sustained move above recent resistance levels less likely in the immediate term.
As the week unfolds, focus remains on the upcoming macro releases and central bank communications, both of which could shape near-term expectations for monetary policy divergence. In this context, EUR/USD appears to be entering a consolidation phase, where any retracement toward the 1.13 area may offer a base for reassessment. However, the medium-term outlook will depend on whether the U.S. economy can avoid a deeper slowdown and whether the perceived policy missteps of the first quarter evolve into longer-term structural shifts that favor the greenback.