FX.co ★ Euro Close to 3-Year Highs Ahead of ECB

The euro maintained its position around $1.14, approaching its highest point since January 2022. This strength is largely due to a widespread weakening of the US dollar, as traders shy away from US assets amidst uncertainty in trade policies. In April, the euro has strengthened approximately 5% against the dollar, driven by investors who are reevaluating the dollar's position in the global financial system and increasingly considering the euro as a solid alternative. Additionally, anticipated increases in defense spending, especially in Germany, have contributed to the euro's upward movement. On the monetary policy front, the European Central Bank is on track to implement its seventh interest rate reduction since June, lowering the key deposit rate from 2.5% to 2.25%. Market forecasts suggest at least two additional rate cuts within the year, as a stronger euro helps alleviate inflationary pressures.