The euro remained resilient above the $1.16 threshold early Monday, as investors await the European Central Bank’s (ECB) monetary policy meeting set for later this week. The EUR/USD pair gained slightly, trading at approximately 1.1650, reflecting cautious optimism among market participants.
Despite growing concerns over transatlantic trade tensions and the impact of a stronger euro on Eurozone exports, the single currency has appreciated nearly 15% against the US dollar since the beginning of the year. While a stronger euro helps ease inflation by lowering the cost of imports, it also exacerbates pressure on European manufacturers by making their goods less competitive abroad.
The ECB is widely expected to hold interest rates steady during its upcoming meeting, breaking a sequence of eight consecutive rate cuts. This pause follows data indicating that annual inflation in the Eurozone hit the central bank’s target in June 2025.
With inflation showing signs of stability, policymakers are expected to adopt a wait-and-see strategy, particularly in light of escalating US tariffs and continued strength in the euro. Carsten Brzeski, chief economist at ING Bank, warned that the current trajectory risks pushing inflation below target levels again, possibly prompting future rate reductions if deflationary risks intensify.
Diplomatic engagements are also on the horizon, as EU envoys prepare contingency plans to address the potential fallout from stalled trade negotiations with the United States. US President Donald Trump’s increasingly aggressive tariff posture ahead of an August 1 deadline has added another layer of uncertainty to the outlook.
The ECB’s decision this Thursday is being closely monitored for any change in tone or forward guidance that might hint at future shifts in monetary policy amid a fragile economic recovery.
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