The EUR/USD surged 1.75% on Wednesday, approaching the 1.0800 mark, as rising risk sentiment followed a shift in US President Donald Trump’s tariff strategy. The President once again recalibrated his approach to trade, backing off from imposing heavy import taxes on US consumers as a means of punishing other nations over a series of grievances.
On Thursday, the European Central Bank (ECB) is expected to announce a 25 basis point rate cut, reducing the Main Refinancing Operations Rate to 2.65% and the Deposit Facility Rate to 2.5%. While EU economic data for the first quarter remains weak and uneven, rate traders have scaled back expectations for further rate cuts this year. With inflation proving more persistent than anticipated, markets are now predicting less than 70 basis points of cuts for the rest of 2025.
In the US, February’s ADP Employment Change report showed only 77,000 new jobs, far below the expected 140,000 and March’s forecast of 186,000. However, given that ADP data has diverged from Nonfarm Payrolls (NFP) results since 2022, the underwhelming number is considered of limited significance.
This week, the Trump administration also announced a one-month delay on tariffs for the automotive sector, which heavily depends on foreign trade. The delay is part of the administration’s effort to impose tariffs without harming the domestic economy.
All eyes are now on Friday’s US Nonfarm Payrolls (NFP) report, with expectations of a modest rebound to 160,000 job additions in February, following January’s weaker-than-expected 143,000.
EUR/USD Outlook
Wednesday’s rally marked the best trading day for EUR/USD in years, rising 185 pips and briefly testing the 1.0800 handle, a level not seen since early November 2024. The pair easily surpassed the 200-day Exponential Moving Average (EMA) at 1.0640, breaking through this key technical barrier.
EUR/USD has surged 4% in just three days, reaching 17-week highs, with price action leaning strongly in favor of the bulls. However, with technical oscillators in overbought territory, a potential pullback toward the 200-day EMA could occur before any new bullish trend gains momentum.
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