The EUR/USD currency pair has experienced a notable rally, snapping back above the 1.1000 psychological level, as markets absorbed the surprise move by the US President on tariffs. Following a volatile session in the US on Wednesday, the pair has managed to recover, edging higher to 1.1050 by Thursday.
The sharp movements in the market have largely been attributed to a combination of tariff-related developments, the impending release of March US Consumer Price Index (CPI) data, and the broader risk sentiment in the market. The article presents a thorough evaluation of the subject courtesy of Vestronmix‘s experts.
Market Response to US Tariff Announcement
The initial shockwave from Wednesday’s session saw the EUR/USD range between 1.1095 and 1.0913, a considerable swing that reflected the uncertainty surrounding the US administration’s tariff policies. The President, who had previously ramped up tariffs as part of his trade strategy, made a significant shift on Wednesday by easing off his stance.
The US administration announced a 90-day pause on tariffs, lowering the reciprocal tariff rate for all countries to 10%. This shift was seen as a response to growing concerns from influential figures and several Republican party leaders, who warned that the tariffs were putting unnecessary strain on markets.
The move was welcomed by markets, particularly US equities, which surged higher in the aftermath of the announcement. The 90-day pause provides room for negotiations with the countries affected by the tariffs, leading many to believe that the pause could reduce some of the trade-related tensions that had been weighing on investor sentiment. As a result, risk appetite improved, which helped the EUR/USD recover from earlier losses.
Focus Shifts to US CPI Data and Federal Reserve Outlook
The focus is on recent shifts to the release of March’s US CPI data, with traders and investors looking for further clues about the state of inflation in the US economy. The US CPI data is expected to show a modest slowdown in inflation, with the headline monthly inflation expected to come in at 0.1%, down from 0.2% in February. The year-on-year headline inflation is forecasted to ease to 2.6%, down from 2.8% in the previous month.
Core inflation, which excludes volatile food and energy prices, is expected to rise to 0.3% on a monthly basis, up from 0.2% in February. Year-on-year core inflation should ease slightly to 3.0%, down from 3.1%. The release of the CPI data will be critical for the Federal Reserve’s next steps, especially given the central bank’s ongoing focus on inflationary pressures.
In addition to the CPI data, weekly US jobless claims will also be released, with the initial claims expected to rise slightly to 223,000, up from 219,000 the previous week. Continuing claims are expected to decrease to 1.88 million, down from 1.903 million. The data will offer further insight into the health of the US labor market, another key factor in shaping the Federal Reserve’s policy decisions.
On the Federal Reserve front, several high-ranking officials are scheduled to speak throughout the day, including Federal Reserve Bank of Dallas President Lorie Logan, Fed Governor Michelle Bowman, and Federal Reserve Bank of Chicago President Austan Goolsbee. Their remarks may provide additional signals about the future direction of US monetary policy, which remains a key focus for markets.
Technical Analysis: Volatile Path Ahead
From a technical perspective, the EUR/USD pair has been navigating a volatile path since the US President’s announcement regarding the tariffs. The 90-day pause initially provided some support for the US dollar, but the market sentiment has since shifted, and the EUR/USD pair has managed to reclaim the 1.1000 psychological level. As of Thursday, the pair is hovering around 1.1050, signaling a potential continuation of the rally.
The next key resistance level for EUR/USD is seen at 1.1200, which capped the pair’s upside in August and September. However, there is also an interim resistance at the year-to-date high of 1.1146. Should the EUR/USD continue its upward momentum, a break above 1.1200 could open the door for further gains.
On the downside, the pair is supported by an ascending trendline near the 1.0910 area, which is expected to provide some support to the current rally. In the event of a breakdown below this trendline, the 200-day Simple Moving Average (SMA) at 1.0735 could act as a stronger support level.
Further downside risks could see the EUR/USD pair testing the 1.0667 level and the 55-day SMA at 1.0645, both of which are key technical support levels for the currency pair.
Conclusion
The EUR/USD rally remains intact, with the pair successfully re-entering the 1.1000-1.1500 region. While the surprise tariff move has provided short-term relief, the market’s focus will soon shift to upcoming data releases, particularly the US CPI and jobless claims.
COMTEX_465114214/2922/2025-05-01T12:45:32
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