FX.co ★ Euro Slips as Lagarde Warns of Growth Risks from US Tariffs

The euro has dipped below $1.085, slightly receding from its nearly five-month peak of $1.09547, achieved on March 18th. This shift follows remarks by ECB President Christine Lagarde, who warned of potential weaker growth but minimized inflationary threats should the EU respond to U.S. tariffs. Addressing European lawmakers on Thursday, Lagarde emphasized that a 25% U.S. tariff on European goods could reduce eurozone growth by 0.3 percentage points in the first year. Any retaliatory tariffs would further exacerbate this impact, pushing the loss to 0.5 percentage points. The initial year would bear the brunt of this impact, with residual effects on output persisting, yet inflationary pressures are expected to diminish over time, indicating the ECB would likely refrain from raising interest rates. Recently, traders have adjusted their forecasts for ECB monetary policy, now anticipating two rate cuts, projected for April and June. Meanwhile, the U.S. Federal Reserve has maintained its interest rates and reiterated its intention to implement two rate cuts this year.