Euro eases as traders digest central bank policy moves

The euro dipped slightly below $1.13 on Thursday, easing for a second consecutive session as investors remained cautious in the wake of a flurry of global monetary policy decisions and ahead of pivotal trade developments. Market participants largely stayed on the sidelines as they digested the Federal Reserve’s latest policy statement, which kept interest rates unchanged but underscored the growing risks posed by the U.S. administration’s protectionist stance.

Euro eases as traders digest central bank policy moves

Chair Jerome Powell warned that prolonged tariff uncertainty could not only drive consumer prices higher but also curtail economic growth and elevate unemployment—adding to the cautious mood in currency markets. In Europe, central banks echoed the Fed’s restrained approach. The Riksbank in Sweden and Norges Bank in Norway both held rates steady, citing a fragile global backdrop and slowing regional activity. While inflation remains close to target in both countries, policymakers flagged downside risks stemming from weak external demand and persistent supply chain disruptions. Meanwhile, the Bank of England is widely expected to cut interest rates by 25 basis points later today, marking its fourth consecutive rate reduction as policymakers attempt to counter sluggish domestic growth and the broader drag from the global trade war. Markets are pricing in a dovish tone, particularly after recent UK data showed continued weakness in business investment and consumer confidence.

Eurozone data hit the currency

The euro’s softness was also reinforced by underwhelming data from within the bloc. Recent figures pointed to stalling retail sales and continued contraction in the construction sector, with sentiment indicators suggesting that economic momentum remains uneven across key member states. Germany, the bloc’s largest economy, showed tentative signs of stabilization in construction but remained mired in industrial weakness. France and Italy both reported further declines in building activity, reinforcing concerns that the eurozone's recovery remains fragile and heavily dependent on external demand. Adding to the uncertainty, President Donald Trump told reporters that a “major trade agreement” would be announced later today, sparking speculation over a potential breakthrough with either the United Kingdom or another key trading partner. At the same time, high-level U.S.-China negotiations are scheduled to resume in Switzerland this weekend, marking the first formal talks since the White House imposed sweeping tariffs of up to 145% on Chinese imports earlier this year. While few expect an immediate resolution, markets are hoping for a roadmap that could lead to the gradual de-escalation of trade hostilities and the rollback of some tariffs. Despite the euro's current weakness, volatility remained relatively subdued as traders await further clarity on both trade and monetary policy. Any surprises from the BoE decision or shifts in tone from the U.S.-China trade discussions could act as catalysts for larger moves in the coming sessions.