COMMENT-A new tale of two economies for EUR/USD?

March 4 (Reuters) - EUR/USD hit a 3-month high Tuesday on the back of lower U.S. yields US10YT=RR driving the dollar =USD to a 4-month low as investors may be positioning for diverging growth patterns between the U.S. and euro zone.

The threat of stagflation for the U.S. economy may be on the mind of investors.

President Donald Trump's imposition of tariffs on Canada, Mexico and China helped fuel views the U.S. economy may slow while inflation rises.

The latest Atlanta Fed GDPNow estimate for Q1 2025 reinforced concerns of slower growth as it dropped sharply to -2.5% from -1.5% just last week.

Meanwhile, Europe's economy may swing towards growth if plans to borrow and spend on defense and infrastructure are implemented.

Those influences are leading investors to expect the Fed to cut deeper than previously projected and the ECB perhaps not cutting as much as previously thought.

German-U.S. 2-year yield spreads US2DE2=RR traded their tightest since Nov. 24 while Fed SRAM26 and ECB FEIZ5 terminal rate spreads tightened and neared -150bps after trading near -205bps just three weeks ago.

Should the current sentiment persist EUR/USD may extend its recent up trend.

Tests of 1.0600/50 resistance, the 200-DMA currently at 1.0729 and November's monthly high could then be in the cards.