The EUR/USD pair remains firm above 1.0400, supported by a weakening U.S. dollar as investors weigh shifting economic conditions and central bank policies. With the greenback under pressure amid softer Treasury yields and cooling inflation expectations, the euro has found room to extend its recovery despite lingering economic uncertainties in the Eurozone.
The dollar’s recent retreat comes as markets adjust their Federal Reserve rate outlook, with speculation growing that the central bank may be nearing the end of its tightening cycle. Softer U.S. economic data and signs of slowing consumer demand have fueled expectations of potential rate cuts later in the year, reducing the dollar’s appeal and giving the euro an opportunity to regain lost ground.
On the European side, the European Central Bank (ECB) remains cautious, signaling a data-dependent approach to future policy moves. While inflation in the Eurozone has shown signs of easing, concerns over economic stagnation persist, limiting the euro’s upside potential. However, should upcoming economic reports suggest resilience in the bloc’s economy, further gains in EUR/USD may materialize.
EUR/USD 1-D Chart as of March 03, 2025 (Source: TradingView)
At the same time, broader market sentiment continues to play a role in currency movements. Risk appetite has improved in recent sessions, favoring higher-yielding assets and weakening the safe-haven demand that had previously supported the U.S. dollar. If this trend continues, the euro could benefit from shifting investor positioning.
Technically, EUR/USD’s ability to hold above 1.0400 is seen as a positive signal, with traders eyeing the next resistance levels for confirmation of a sustained move higher. However, a break below this threshold could quickly reverse momentum, putting the euro back under pressure.
With key U.S. economic data ahead, including retail sales and inflation figures, traders will be closely watching for signs of how the Fed may adjust its policy path. Any surprises could trigger fresh volatility in the EUR/USD pair, making the upcoming trading sessions crucial for determining its near-term direction.
