- The EUR/USD pair sees renewed buying interest around the 1.1300 level as the US Dollar weakens after a two-day period of gains.
- Reports indicate that the US government is willing to negotiate a trade agreement with China.
- ECB’s Nagel cautions that the German economy may experience a slight contraction.
The EUR/USD pair has stabilized near 1.1300, subsequently rising to approximately 1.1385 during Thursday’s European session, following a two-day decline. This recovery in the major currency pair is driven by Euro (EUR) strength, despite growing market expectations that the European Central Bank (ECB) will reduce interest rates at its June policy meeting. This dovish sentiment surrounding the ECB is fueled by officials’ belief that inflation will return to the bank’s 2% target within the current year.
On Wednesday, ECB council member and Bundesbank President Joachim Nagel reaffirmed his expectation that “Eurozone inflation will return to 2% this year,” while acknowledging that “the degree of uncertainty is exceptionally high,” according to Reuters. Nagel cautioned that the German economy might face a minor “recession” for the third consecutive year, particularly in light of tariffs announced by US President Donald Trump.
During Thursday’s European trading session, ECB official and Finnish central bank head Olli Rehn stated that the monetary authority “should consider the possibility of a more substantial interest rate reduction”.
