ECB Eyes Rate Cut; Global Trade Tensions Intensify

The euro (EUR/USD) rose on expectations that the European Central Bank (ECB) will cut interest rates by 25 basis points to 2.25%. This anticipated move reflects growing concerns over disinflation, fragile economic growth, and intensifying trade tensions with the U.S. Eurozone inflation data for March is expected to cool slightly, supporting the case for further monetary easing.

Analysts from ING and Barclays view the cut as nearly certain, aimed at shoring up market confidence. Despite signs of improvement—such as a surprise rebound in industrial output—the broader economic outlook remains weak. ECB President Christine Lagarde maintains a cautious, data-dependent stance, underscoring global uncertainties, including Germany’s potential fiscal stimulus and evolving U.S. trade policy.

Germany’s inflation dropped to 2.3% in March from 2.6% in February, yet the country faces mounting headwinds. Investor sentiment plunged sharply in April, driven by fears over the impact of U.S. tariffs on export-heavy industries such as capital goods and autos. The German government’s recent €500 billion stimulus fund is unlikely to yield quick results due to political friction and lackluster domestic demand. As a result, growth forecasts have been slashed, with GDP expected to rise just 0.1% in 2025, down from a previous 0.8% estimate—making Germany the only G7 economy with no growth for two consecutive years.

The economic spillover is also impacting Central and Eastern Europe (CEE). Countries like Poland, Hungary, and the Czech Republic—deeply integrated with German industry—are expected to see 2025 GDP growth trimmed by 0.4–0.6 percentage points. Hungary is especially vulnerable, with S&P downgrading its credit outlook to negative due to mounting fiscal and trade pressures.

Meanwhile, France’s inflation remained stable at 0.9% in March after falling below 1% in February—its lowest in four years. Though France’s economy modestly outperformed expectations with Q1 growth of 0.2%, trade uncertainty continues to weigh on outlook. A central bank survey found resilience in luxury and aerospace sectors, but most firms reported declining orders and weak visibility.

In the U.S., investor sentiment has deteriorated amid escalating trade tensions under President Trump. The dollar weakened for a fourth consecutive week as markets reacted to unpredictable tariff announcements, particularly toward China. The administration’s 145% tariffs on Chinese goods prompted a 125% retaliation from Beijing, while a new probe into critical mineral tariffs raises fears of broader supply chain disruptions.

Federal Reserve Chair Jerome Powell acknowledged that economic growth appears to have slowed in Q1 and emphasized a cautious, data-driven approach. Although the Fed remains committed to its dual mandate of price stability and full employment, Powell warned that tariffs could raise inflation while weakening demand. He ruled out immediate intervention but noted that trade shocks represent “fundamental changes” that complicate traditional policy responses. Fed Governor Christopher Waller signaled support for earlier and deeper rate cuts if the economy deteriorates, even if inflation ticks higher. Markets continue to expect rate cuts beginning in June, with futures pricing in a full percentage point reduction by year-end. The Fed’s current policy rate stands at 4.25%-4.50%.

Despite trade turmoil, foreign demand for U.S. Treasuries surged in February. Total holdings rose by 3.4% to $8.817 trillion, led by Japan and China, who increased their holdings to $1.13 trillion and $784.3 billion respectively. Total net foreign inflows hit $284.7 billion, driven largely by private investment in long-term securities. Analysts caution that any major Treasury sell-off—especially by China—could destabilize bond markets.

Retail sales jumped 1.4% in March, marking the strongest gain in over two years. Year-on-year, sales climbed 4.6%, driven by consumer stockpiling ahead of expected price increases from new tariffs. Vehicle and online sales were especially strong. However, economists warn that this preemptive buying may fade as tariffs are implemented and consumer sentiment worsens.

Despite a temporary suspension of tariffs on tech goods from China, broad levies remain in place. Additional tariffs are expected on electronics, pharmaceuticals, and other strategic sectors. As uncertainty lingers, policymakers and investors brace for deeper economic volatility and potential stagflation.

As a result, EUR/USD is likely to remain supported in the near term, with potential to test the 1.14–1.15 range. However, lingering structural weaknesses in the Eurozone, combined with fragile industrial demand in Germany and trade-linked volatility, could cap EUR/USD upside beyond 1.15. Should U.S. Treasury yields stabilize or rebound, EUR/USD may retrace toward 1.1250 in the medium term.

Data for Technical Analysis (1D) CFD EUR/USD

Resistance : 1.1413, 1.1445, 1.1495

Support : 1.1313, 1.1281, 1.1231

1D Outlook   

Source: TradingView 

Buy/Long 1 If the support at the price range 1.1233 - 1.1313 is touched, but the support at 1.1313 cannot be broken, the TP may be set around 1.1445 and the SL around 1.1193, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.1413 - 1.1493, TP may be set around 1.1577 and SL around 1.1273, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.1413 - 1.1493 is touched, but the resistance at 1.1413 cannot be broken, the TP may be set around 1.1313 and the SL around 1.1373, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.1233 - 1.1313, TP may be set around 1.1181 and SL around 1.1453, or up to the risk appetite.       

Pivot Points Apr 17, 2025 03:40AM GMT