Euro Strengthens to Multi-Month High as EU Eases Trade Tensions with US

The Euro soared early Friday, with EUR/USD climbing toward 1.1350, as easing trade tensions between the European Union and the United States provided a fresh boost to the shared currency. The move follows Brussels’ decision to temporarily suspend new tariffs on American imports, signaling a strategic shift in transatlantic trade policy.

EU Offers Olive Branch in Trade Dispute

In a surprise announcement late Thursday, the European Commission confirmed a 90-day freeze on the 25% retaliatory tariffs initially planned for U.S. goods. The move is seen as a goodwill gesture intended to de-escalate tensions and allow for structured negotiations over the summer.

While Washington’s broader tariff regime remains intact — particularly levies on steel, aluminum, and automobiles — the White House has now lowered the general duty on European exports to 10%, reversing a brief hike to 20% earlier this week.

Markets Reassess ECB Policy Path

The European Central Bank’s future rate path is under renewed scrutiny as traders adjust expectations amid shifting macro dynamics. The ECB deposit rate is now projected to land near 1.80% by year-end, marking a notable shift from 1.65% just 48 hours earlier. Meanwhile, bets on an April rate cut have pulled back slightly, with market odds falling to 90% from full certainty the day prior.

Dollar Pressured by Cooling Inflation

The U.S. Dollar continues to weaken, with the Dollar Index (DXY) retreating to 100.20 in early Friday trading. Recent inflation data has reinforced market expectations that the Federal Reserve may have more room to ease monetary policy later this year.

According to the latest Consumer Price Index report, headline U.S. inflation cooled to 2.4% year-on-year in March, down from 2.8% in February. Core CPI also undershot forecasts, rising 2.8% versus the expected 3.0%. On a monthly basis, headline prices declined by 0.1%, while core inflation nudged up just 0.1%.

Eyes on Producer Prices and Consumer Sentiment

Investors now turn to key economic data due later in the day — the March Producer Price Index and the University of Michigan’s preliminary Consumer Sentiment report — for further signals on inflation and economic confidence.

Should these reports confirm softening price pressures, EUR/USD could find additional support to sustain momentum above the 1.1300 handle in the short term.

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