The euro held above $1.13 in the first full week of May, helped by easing trade tensions after U.S. President Trump reiterated that China remains open to a deal, sparking cautious optimism in global markets.
Euro holds above $1.13 as trade tensions ease
This renewed sentiment bolstered risk appetite and provided support to the common currency amid an otherwise uncertain macroeconomic backdrop. Investors also looked ahead to key monetary policy decisions from several major central banks, including the Federal Reserve, Bank of England, Norges Bank, and Riksbank, all of which are navigating a complex landscape of sticky inflation and slowing global growth. The Fed is widely expected to keep interest rates unchanged following a solid April jobs report, which showed continued strength in the labor market and tempered recession fears, though officials remain wary of persistent price pressures. In contrast, the Bank of England is seen as likely to cut rates amid growing concerns that escalating tariffs and weakening demand could significantly weigh on the UK economy and exacerbate already muted inflationary dynamics.
Eyes on central bank moves
Meanwhile, both Norway’s Norges Bank and Sweden’s Riksbank are expected to maintain their current policy rates, as they balance domestic inflation risks with external uncertainties, including volatile energy prices and currency fluctuations. In the Eurozone, unexpectedly strong inflation data added to the debate over the future path of European Central Bank policy. Headline inflation held steady at 2.2% in April, slightly above the 2.1% forecast, while services inflation jumped to 3.9% and core inflation—excluding food and energy—rose to 2.7%, both surpassing expectations and raising questions about the timing and scale of the anticipated 60 basis points in ECB rate cuts by year-end. These figures suggest that inflationary pressures may be more entrenched than previously thought, complicating the ECB's efforts to engineer a soft landing for the euro area economy.
