​EBC Markets Briefing | Euro down with ECB turning hawkish

The euro dipped on Tuesday s Washington and Beijing remained locked in trade talks that left markets unsettled. China-Europe trade maintained growth momentum in Q1 despite headwinds.

The ECB cut interest rates as expected on Thursday but hinted at a pause in its year-long easing cycle given inflation within target. Markets sees a just one more rate cut toward the end of the year, possibly in December.

The central bank is "nearly done" cutting interest rates if inflation settles at 2% as expected and any surprises in growth and inflation data would "affect" the policy path, Boris Vujcic said on Saturday.

Ongoing trade tensions escalated by Washington are a shock to the global economy, meaning the Fed's and the ECB's monetary policies are unlikely to diverge for long, Isabel Schnabel said.

The latest interest-rate moves prime policymakers to meet medium-term inflation goal but what lies ahead of them "will be delicate and very uncertain," President Christine Lagarde said in an interview.

The EU is likely to retaliate against any permanent US tariffs, raising the cost of trade. Firms could relocate some activity to avoid trade barriers but changes to supply chains are also likely to raise costs.

The euro rebounded from its previous low around 1.1387. The range trading may well continue, so we see the common currency keep going north with initial resistance at 1.1411.

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