The euro recorded its highest level in a month.
What’s happening :- The euro moved higher versus the US dollar on Tuesday following news of Germany forming a coalition government.
What happened :- Germany’s Christian Democratic and Christian Social Union bloc reached an agreement with the centre-left Social Democrats to form a coalition government.
Weakness in the US dollar also lent support to the EUR/USD forex pair.Why it matters: Investors have been focusing on the trade war, after US President Donald Trump announced higher tariffs on its trading partners.
Euro rises to highest level in a month
The European Commission said it had proposed zero-for-zero tariffs to the US in a bid to avert trade dispute, but the proposal had been rejected by the US. The European Union announced plans to impose 25% counter-tariffs on US goods, after Trump proposed tariffs on steel and aluminium last month.
China also reaffirmed that it would retaliate and fight till the end after Trump announced plans to impose 50% tariffs unless Beijing rolled back its retaliatory measures.
Investors are expecting higher interest rate cuts by the European Central Bank. The EBC is expected to cut rates by 25 basis points at its meeting later this month, and another two rate cuts by yearend.
What are the reasons for the rise of the euro?
On the economic data front, France’s current account deficit widened to €1.9 billion in February, from €1.3 billion in January. The region’s current account gap was the largest since April 2024, as goods account deficit widened to €6.4 billion, from €5.8 billion in the previous month.
Weakness in the US dollar provided a boost to the EUR/USD forex pair on Tuesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell over 0.4% to 102.96 on Tuesday.
The EUR/USD pair gained more than 0.5% to $1.0959 after recording losses in the previous two sessions.
The STOXX Europe 600 Index surged 2.72% to close at 486.91 on Tuesday, after recording their worst four-session plunge since the covid-19 pandemic.
Euro price today
What to watch :- Investors await inflation data from Germany and Spain this Friday. Analysts expect Germany’s consumer price inflation to ease to 2.2% in March, which would be the lowest rate since November 2024. Spain’s annual inflation rate is expected to decline to 2.3% in March, from 3% in the previous month.