FX.co ★ Euro Rallies Above $1.10 Amid Global Trade Tensions

The euro rose back above $1.1, nearing its highest point since October 2024, driven by rising trade tensions and indications of political stability in Europe that supported the single currency. On Wednesday, China declared it would increase tariffs on all U.S. goods to 84%, an escalation from the previously announced 34%, responding to Washington's extensive tariff hikes that elevated duties on Chinese imports to 104%. This development shifted market sentiment, prompting investors to move away from traditional safe havens like U.S. Treasuries and the dollar. In Europe, Germany's CDU/CSU bloc and the SPD successfully negotiated a coalition agreement, setting the stage for Friedrich Merz to become chancellor next month. Meanwhile, on the monetary policy front, the European Central Bank is widely anticipated to implement a 25 basis point rate cut this month. Additionally, markets are factoring in two more cuts by the end of the year, with growing speculation about a potential third reduction should economic conditions continue to deteriorate.