- EUR/USD is benefiting from a boost in global risk sentiment.
- The Euro may encounter challenges as markets expect a 25 basis point rate cut by the ECB on Thursday.
- The CME FedWatch tool shows that markets are anticipating approximately 85 basis points of rate cuts by the Fed by the end of the year.
EUR/USD Rebounds to 1.1340 in Asian Trading
The EUR/USD pair is trading around 1.1340 during the Asian session on Wednesday, recovering after two days of consecutive losses. The rebound is supported by improved global risk sentiment, following U.S. President Donald Trump’s announcement to exempt key tech products from newly introduced “reciprocal” tariffs.
Upside for Euro May Be Limited Ahead of ECB Decision
Despite the recent recovery, the Euro’s upward momentum may be capped, as markets broadly anticipate a 25 basis point rate cut from the European Central Bank (ECB) on Thursday. This expected move reflects growing recession concerns driven by U.S. trade policy developments. The ECB has already implemented two rate cuts this year, bringing the Deposit Facility Rate to 2.5%. A further cut would lower it to 2.25%.
Lagarde’s Comments in Focus for Policy Guidance
Investors will be paying close attention to ECB President Christine Lagarde’s press conference for clues on the central bank’s future policy stance and its assessment of the potential fallout from U.S. trade actions on the Eurozone economy.
Fed Policy and U.S. Retail Sales Data Awaited
On the U.S. front, the CME FedWatch Tool indicates that markets are pricing in around 85 basis points of rate cuts by the end of the year, although the Federal Reserve is expected to keep rates unchanged at its next meeting. Later today, traders will turn their focus to March’s U.S. Retail Sales data, which could offer insights into how tariff-related uncertainties are impacting consumer spending.
