Forex Report: Euro and Pound Hold Near Multi-Month Highs as Dollar Remains Under Pressure

The euro and the British pound remained near their multi-month highs against the U.S. dollar on Thursday, as concerns over slowing U.S. economic growth and escalating trade tensions weighed on the greenback.

The euro was last seen at $1.0880, slightly lower but still near its five-month high earlier in the week. Meanwhile, sterling was steady at $1.2963.

Trade Tensions Weigh on the Dollar

Global currency markets have been volatile, with traders reacting to rising trade disputes and fears of a U.S. recession.

On Wednesday, President Donald Trump threatened additional tariffs on the EU and Canada, prompting retaliatory measures from both regions. While these tensions have rattled markets, they have hurt the U.S. dollar more than European currencies, leading to its continued weakness.

Germany’s Fiscal Reforms Boost Euro Sentiment

The euro has also found support from Germany’s proposed fiscal reset, which includes a €500 billion infrastructure fund and revisions to borrowing rules.

Germany’s outgoing parliament will hold a special session on Thursday to debate the plan. Analysts believe that if the package is approved, it could boost economic growth in Germany and across the eurozone.

Dollar Index Near Five-Month Lows

The U.S. Dollar Index (DXY), which tracks the currency against a basket of six major peers, was at 103.7, slightly higher but still near its lowest levels in five months.

While U.S. inflation data came in weaker than expected, offering temporary relief, analysts warn that it does not fully reflect the impact of Trump’s tariffs, which could fuel inflation in the coming months.

Other Major Currencies

• The Japanese yen remained stable at 148.115 per dollar, with little reaction to Bank of Japan (BOJ) Governor Kazuo Ueda’s comments reaffirming the BOJ’s commitment to shrinking its balance sheet.
• The Swiss franc hovered near its strongest level in three months at 0.882 per dollar, benefiting from safe-haven demand.
• The Canadian dollar was flat at 1.4368 per U.S. dollar, following the Bank of Canada’s 25-basis-point rate cut on Wednesday.

Outlook: Currencies Remain in Tight Ranges Amid Uncertainty

With trade tensions and monetary policy shifts driving sentiment, currency markets remain cautious. Traders are closely monitoring developments in Germany’s fiscal policy and U.S. trade actions, as these factors will likely influence exchange rate movements in the coming weeks.