Chart of the day - EURUSD (05.03.2025)

EURUSD continues dynamic rebound since the start of the week. The currency pair is gaining 0.50% today, reaching 1.0660, while total gains for the week have already approached 2.70%.

Donald Trump's chaotic policies, including unpredictable tariff decisions, even against the U.S.'s closest trade partners, appear to be harming the American economy. The first leading indicators released for February—such as ISM, PMI, and Conference Board sentiment-based measures—suggest deteriorating sentiment. Investors are beginning to price in the negative impact of Trump’s protectionist policies. Even during yesterday’s press conference, Trump admitted that his changes could disrupt the economy in the short term. As a result, we are seeing a correction in stock markets and a weaker dollar.

From the European perspective, speculation about increased defense spending does not seem to have a significant impact on eurozone economic growth. Initially, markets reacted positively to the rally in European defense stocks, temporarily halting the rise in European bond prices, including German bonds. However, in recent weeks, U.S. bond prices have surged, leading to a sharp decline in yields.

Today's gains in EURUSD appear to be driven by hopes that U.S. tariffs on close trade partners will be temporary, as well as by the agreement reached by Merz in Germany aimed at increasing defense spending. Following this announcement, German bond yields saw an immediate increase. Additionally, late yesterday, U.S. Secretary of Commerce Howard Lutnick stated that the Trump administration may roll back some tariffs on Mexico and Canada. This raises expectations that a similar approach could be taken toward tariffs on Eurozone products.

As a result, EURUSD is up 0.50% today, supported by both dollar weakness and euro strength.

Source: xStation 5