EUR/USD extended its rebound from Friday’s one-month low in the 1.1750–1.1740 area. It climbed to around 1.1835 in the Asian session as the US Dollar weakened broadly.
On Friday, the US Supreme Court ruled that Donald Trump did not have the authority to impose broad reciprocal tariffs under the IEEEPA. After the ruling, a new 15% tariff framework was announced, adding to worries about the economic impact of rising trade tensions.
Us Data And Dollar Reaction
US data signalled slower growth. This outweighed stronger inflation figures and pushed the Dollar down from a four-week high. The first estimate of fourth-quarter GDP showed annualised growth of 1.4%, down from 4.4% in the third quarter and below forecasts.
Inflation data showed the core PCE Price Index rose 0.4% month-on-month in January. The yearly rate rose to 3.0%, the highest since November 2023. This supports the case for keeping rates unchanged in March. Even so, markets still expect a cut in June and at least two 25-basis-point cuts in 2026.
In Europe, the euro was pressured by uncertainty around ECB President Christine Lagarde’s tenure and by trade-war concerns. The European Parliament’s trade chief said the EU may pause ratifying a US trade deal until the US provides more clarity on its trade policy.
Overall, a softer US dollar is lifting EUR/USD away from last month’s lows. The move is being driven by weaker US growth data from late 2025 and ongoing trade disputes. However, high inflation still complicates the outlook for Federal Reserve policy.
Volatility And Rate Cut Expectations
The tension between slowing growth and rising prices has pushed up implied volatility in EUR/USD options. One-month volatility is now at its highest level since the fourth quarter of 2025, showing how uncertain the outlook is. A weaker-than-expected January jobs report also added to these concerns, with payrolls rising by only 95,000.
Markets are becoming more confident the Federal Reserve will cut rates. Fed Funds futures now suggest a better than 70% chance of a 25-basis-point cut by the June meeting. Expectations of lower US yields make holding dollars less attractive. Derivatives traders should watch this closely, as any surprisingly strong data could trigger a sharp reversal.
In Europe, recent data offers a modestly more positive picture. Germany’s IFO Business Climate survey improved unexpectedly, and flash Eurozone CPI for February held steady at 2.4%. This eased some near-term pressure on the ECB. Compared with a slowing US, this relative stability supports the euro’s recent strength.
For traders looking for a continued rise in EUR/USD towards 1.1900, buying call options may be a sensible approach. It allows participation in further dollar weakness while limiting the maximum loss if trade talks improve suddenly or if US data surprises to the upside. The higher cost of options, driven by rising volatility, reflects the event risk ahead.
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