Euro to Dollar Forecast: EUR/USD Jumps Above 1.10 on US Recession Fears

April 3, 2025 - Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: EUR/USD Jumps Above 1.10 on US Recession Fears

The Euro (EUR) rallied sharply against the US Dollar on Thursday after President Trump’s imposition of tariffs increased fears over the US and global economy and sparked increased recession talk.

Danske Bank commented; “The new tariffs were generally stronger and broader than we and markets expected, and sent shockwaves through global markets amid worries that the aggressive duties will slow growth, hit corporate earnings, and increase inflation.”

There are fears that the Euro-Zone will be hit hard, but the Euro gained defensive support with the Euro to Dollar (EUR/USD) exchange rate hit 6-month highs just above the key 1.1000 level.

An exodus from US capital markets could support the Euro and undermine the dollar.

ING commented; “While a global trade war in theory is a euro-negative, the soft underbelly of the US economy is the dominant factor for EUR/USD right now. A much sharper sell-off in US equities, dragging US rates even lower, adds another nail in the coffin of US exceptionalism and could send EUR/USD over 1.10.”

It added; “Major medium-term resistance sits in the 1.11/12 area. It's hard to call a major break of that unless US activity craters.”

According to Danske Bank; “we expect consolidation around current levels in the near term, with risks tilted to the upside.”

As part of its wider tariff plan, the US Administration has imposed a 20% tariff on goods imports from the EU.

At this stage, the EU has not announced any formal retaliation, but the rhetoric is tough.

According to European Commission chief Ursula von der Leyen said the new tax imports will see uncertainty spiral causing dire consequences for millions of people around the globe".

She vowed that Europe would take a unified approach and warned that it is preparing countermeasures in case negotiations fail.

She added; "If you take on one of us, you take on all of us."

There are potential interest rate implications with markets now pricing in over a 90% chance that the ECB will cut rates this month.

The chances of a May Fed rate cut have also increased to around 20% with around a 75% chance of a move by mid-year.

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TAGS: Euro Dollar Forecasts