Euro price slips below $1.14 as ECB officials highlight downside inflation risks
Euro trims gains as ECB dovish signals and U.S. trade uncertainty weigh
The euro eased slightly on Tuesday, trading around $1.1390 after nearing the $1.15 mark earlier this month, its highest level since 2021. Investors reassessed the outlook for the European Central Bank’s monetary policy stance after key ECB officials signaled growing downside risks to Eurozone inflation, while the U.S. dollar recovered modestly amid lingering uncertainties surrounding U.S.-China trade negotiations.
Recent comments from ECB policymakers, including Finland’s Olli Rehn and France’s François Villeroy de Galhau, emphasized the need for further interest rate cuts. Rehn suggested that rates could even fall below the neutral level if inflation risks deepened, while Villeroy de Galhau asserted that there was still "room to lower interest rates" to counterbalance slowing economic momentum driven by escalating tariffs. These dovish signals followed the ECB’s decision last week to trim its deposit rate by 25 basis points to 2.25% and remove its prior characterization of monetary policy as "restrictive."
Meanwhile, weaker-than-expected Spanish GDP figures and softer inflation readings added to concerns about Eurozone growth prospects. Spain’s economy expanded 0.6% in the first quarter, below the 0.7% consensus, while inflation ticked up 2.2% year-over-year in April.
EUR/USD price dynamics (March 2025 - April 2025) Source: TradingView.
U.S. dollar steadies amid mixed trade developments
The U.S. Dollar Index (DXY) rebounded to 99.35, as investors sought safety amid mixed signals on the U.S.-China trade front. Treasury Secretary Scott Bessent stressed that progress was "up to China," even as President Trump claimed communication lines with Chinese President Xi Jinping were open — assertions that Beijing has since denied.
Traders are closely watching upcoming U.S. data releases, including Q1 GDP, ISM PMIs, and March PCE figures, which could reshape expectations around the Federal Reserve's policy path. The JOLTS Job Openings report later today will also be critical, with consensus calling for 7.5 million job postings.
Technical outlook: EUR/USD holds above major support
Technically, EUR/USD remains supported above the 20-week EMA near 1.0890, maintaining a broader bullish bias. However, the weekly RSI sits above 70, indicating overbought conditions and raising the risk of a corrective pullback. Immediate resistance is located at the psychological 1.1500 level, while support rests near 1.1276, the July 2023 high.
As previously discussed in our April coverage, the euro’s rally past $1.13 aligned with growing speculation about a shift away from dollar dominance. However, sustaining momentum beyond $1.15 will likely require renewed clarity on Eurozone inflation trends and a stable macro backdrop
