EURUSD and Broader Economic Developments

The EURUSD pair finds support during the Asian session on Thursday, recovering a portion of its overnight decline from the 1.1375-1.1380 resistance zone. Despite this rebound, spot prices remain within a familiar trading range observed over the past week, hovering just above the 1.1300 level amid mixed market signals.

The election of Friedrich Merz as Germany’s chancellor has reduced uncertainty in the Eurozone’s leading economy, providing some support to the euro. Conversely, the US Dollar (USD) struggles to gain significant momentum despite the Federal Reserve’s (Fed) hawkish pause announced on Wednesday. This serves as an additional tailwind for the EURUSD pair.

Fed Chair Jerome Powell emphasized ongoing uncertainty regarding US trade tariffs, stating that the prudent approach is to await further clarity. This stance suggests that the central bank is not inclined to cut interest rates in the near term. Nevertheless, escalating economic uncertainty driven by US President Donald Trump’s tariff policies continues to undermine USD strength.

Investors remain cautious as Trump’s rapidly shifting stance on trade policies raises concerns. Additionally, the European Union has reportedly warned of imposing tariffs on Boeing aircraft if trade negotiations with the US falter, heightening the risk of a deeper trade conflict. This uncertainty restrains traders from taking aggressive positions in the EURUSD pair, resulting in muted price action.

Looking ahead, traders will focus on the release of US Weekly Initial Jobless Claims data, with particular attention on Trump’s scheduled press conference at 14:00 GMT in the Oval Office. This event is expected to significantly impact USD price movements and could provide directional cues for the EURUSD pair.

In related developments, Ukraine is reportedly considering reducing its dependence on the US dollar and exploring a stronger connection to the euro, according to Reuters, which cited Central Bank Governor Andriy Pyshnyi. This potential shift comes amid increasing fragmentation in global trade and Ukraine’s growing ties with Europe. Pyshnyi noted that such a transition would be a complex process requiring extensive preparation.

During the previous session and early Asian trading hours, the market sentiment was largely shaped by the Federal Reserve’s monetary policy decision. As anticipated, the Federal Open Market Committee (FOMC) maintained the benchmark federal funds rate at 4.25%–4.50%. However, Fed Chair Powell’s cautious tone drew significant attention. He reiterated that while the US economy remains resilient, heightened trade tensions and tariffs are injecting uncertainty into the inflation and employment outlook.

Despite the widely expected rate hold, the market reaction was relatively subdued. The Nasdaq index gained 0.27%, closing at 17,738.16, as investors adopted a wait-and-see approach. On the forex front, the US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, edged higher following the Fed’s announcement. Meanwhile, gold prices fell, pressured by the strengthening dollar and reduced demand for safe-haven assets in the absence of a dovish Fed surprise.