Insights 
VT 
The EUR/USD has climbed above 1.1200, with the US Dollar gaining support due to easing trade tensions. A “major” trade deal between the US and the UK was announced, though 10% tariffs remain in place.
The US Initial Jobless Claims for the week ending May 3 dropped to 228,000, slightly surpassing expectations, whereas the previous week’s figure was 241,000. The insured unemployment rate stayed at 1.2%, while continuing claims reduced by 29,000 to 1.879 million.
Eurozone Economic Outlook
The Euro is pressured as the European Central Bank (ECB) may consider further rate cuts, with concerns about the Eurozone’s economic outlook. However, the ECB hopes inflation will reach the 2% target by the year’s end.
The Euro is traded by 19 EU countries and is the world’s second most traded currency after the US Dollar. In 2022, it made up 31% of foreign exchange transactions, with EUR/USD being the most traded currency pair.
Euro value is influenced by inflation, economic data, and trade balance. High inflation obliges the ECB to raise rates, boosting the Euro. Strong economies encourage investment, while positive trade balances also strengthen a currency.
In recent sessions, the EUR/USD breaking above the 1.1200 level may lead some to assume bullish pressure is building, yet the underlying sentiment is more nuanced. The US Dollar, while appearing to retreat, is actually supported by the easing in trade tensions, particularly those linked to a new agreement between Washington and London. Though the headlines boast about a “major” trade deal, it’s worth taking note that key tariffs weren’t removed. A 10% charge still applies, a clue that the resolution may be more partial than comprehensive. From a pricing perspective, that gives the Dollar some breathing space—less aggressive risk repricing, reduced fear of an all-out trade war.
US Labor Market Resilience
We’ve also had better-than-expected weekly jobless figures out of the US. Initial claims came in noticeably lower at 228,000, briefly defying forecasts. That sort of labour market resilience tends to feed rate stability or even hawkish speculation, depending on other indicators. Continuing claims are retreating too—they’re not nosediving, but they are heading in the right direction with a 29,000 drop. What doesn’t move, perhaps more tellingly, is the insured unemployment rate. Stubbornly fixed at 1.2%, this raises questions about longer-term participation and whether enough Americans are shifting back into full employment fast enough to concern the Fed.
As for the Euro, the mood is less certain. The European Central Bank is no longer holding back its dovish tone. Discussions around further rate cuts have become less speculative and more grounded in data. It’s a reaction, frankly, to growing worry about how the Eurozone might end the quarter. If ECB policymakers are uneasy about reaching their 2% inflation target organically, then further adjustment may be employed mechanically. That expectation alone injects softness into the Euro. Traders dealing strictly in yield differentials would already be factoring it in.
We’re still dealing with a vast and liquid currency here. Trading flows in EUR/USD remain dominant globally, and in 2022 they made up nearly one-third of foreign exchange transactions. That level of volume doesn’t disappear overnight, but the shape of it changes. When the ECB signals cuts while the US leans on job creation and consumer activity, the spread reassessment will widen, leading to an increasingly dollar-favoured bid at key technical junctions.
It’s the subtle push and pull of macroeconomic inputs that matters. Inflation, real or expected, moves policy. If consumer prices climb in Europe unexpectedly, for example, then even a hesitant ECB may pause. That pause—for us—would reframe forward guidance. Policies shift not only because of ECB projections but due to how insights from PMIs, trade balances, or wage data shape those projections. At every inflection point, traders should be reading the ECB not by what they declare outright, but where they hedge their language.
In the weeks ahead, there will probably be conflicting pressures building. Shorter-term traders might need to lean more on timing and less on positioning. Anything that adds weight to the US labour market story—be that CPI surprise or wage growth—will strengthen the greenback. If Eurozone data remains patchy, especially in consumer spending or industrial output, pressure will mount on Frankfurt to act. When that happens, rate differentials become less of a debate and more of a dictate.
