The euro is back to where it was on February 28.
But the rebound in EUR/USD does not mean Europe’s macro risks have gone away. The euro zone is still highly exposed to imported energy costs
That leaves EUR/USD caught between two opposing forces. Slower growth from higher energy prices argues against euro strength. But if inflation stays sticky, the European Central Bank may have to stay tighter for longer than markets had expected.
Reuters reported that traders are pricing roughly a 40% chance of an ECB hike at the April meeting.
For GBP/USD, the picture is similar but potentially more fragile.
The IMF has delivered the largest G7 growth downgrade to the UK for 2026, cutting its forecast from 1.3% to 0.8%.
Even so, sterling has climbed back to around $1.355, completing the same round trip as the euro. Markets may also be reassessing how much room the Bank of England really has to ease if inflation remains elevated.
At least, for now, both EUR/USD and GBP/USD are being supported by a weaker dollar.
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