The euro fell below $1.13 on Thursday, retreating to its lowest level in over a week, pressured by a combination of broad dollar strength and mixed signals from the European Central Bank.
Euro extends losses on Thursday
The U.S. dollar gained ground after the U.S. Court of International Trade struck down former President Donald Trump’s sweeping reciprocal tariffs and ordered the administration to cease their collection. The ruling helped ease investor concerns about an intensifying trade war, bolstering global risk sentiment and reinforcing demand for the greenback as a safe-haven currency amid geopolitical recalibration.
Adding to the euro’s weakness, political uncertainty resurfaced after President Trump unexpectedly postponed a planned 50% tariff hike on European Union imports to July 9th. The measure, originally scheduled to take effect on June 1st, had triggered renewed trade tensions between Washington and Brussels. While the delay provided short-term relief, it also injected fresh ambiguity into transatlantic relations, leaving investors wary about potential volatility in the weeks ahead.
On the monetary policy front, markets are now turning their attention to the European Central Bank’s upcoming decision next week. While many analysts still expect another rate cut as inflation remains subdued and growth sluggish, recent comments from several ECB officials have introduced a more hawkish tone. Some policymakers are now advocating for a pause in further easing, citing concerns over financial imbalances and the diminishing returns of ultra-loose policy. The euro remains sensitive to any shift in tone from Frankfurt, particularly as divergence grows between the ECB and the Federal Reserve.
Fresh economic data added to the uncertainty
France’s inflation rate unexpectedly slowed in May, reinforcing the view that underlying price pressures in the eurozone remain weak. The deceleration in consumer prices may further complicate the ECB’s policy calculus, especially as the region continues to grapple with uneven recovery dynamics across member states.
Taken together, these factors have created a challenging backdrop for the euro, which may remain under pressure in the near term as traders digest trade policy developments, central bank signals, and macroeconomic data from across the bloc.
