EUR/USD recovers further from one-month low set on Friday, eyes mid-1.1800s on weaker USD

• EUR/USD attracts strong follow-through buying on Monday amid a broad-based USD weakness.
• Renewed concerns about the economic fallout from renewed trade tensions weigh on the buck.
• Bets that the US Fed will cut rates during the latter half of this year further undermine the USD.

The EUR/USD pair is seen building on Friday's late recovery from the 1.1750-1.1740 region, or a nearly one-month trough, and gaining some follow-through positive traction at the start of a new week. The momentum lifts spot prices to the 1.1835 area during the Asian session and is sponsored by a broadly weaker US Dollar (USD).

Despite the judicial setback, US President Donald Trump signaled that his trade agenda remains firmly intact and moved quickly to announce a new 15% tariff framework. The Supreme Court on Friday ruled Trump did not have the authority to impose sweeping reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA). However, the rapid imposition of tariffs fueled concerns about the potential economic fallout from rising trade tensions. Moreover, a weak US GDP report overshadows hot US inflation data and drags the USD away from a four-week high, acting as a tailwind for the EUR/USD pair for the second straight day.

The first estimate of the fourth-quarter GDP showed that the US economy slowed dramatically at the end of 2025, in part because of the record-long government shutdown. On an annualized basis, the GDP growth decelerated sharply to 1.4% during the October-December period from 4.4% in the third quarter and missed market expectations by a big margin. Meanwhile, the US core Personal Consumption Expenditure (PCE) Price Index rose 0.4% MoM in January and the yearly rate rose to 3.0%, marking the highest since November 2023. This, in turn, could allow the Fed to keep interest rates on hold at the next policy meeting in March.

That said, traders are still pricing in a greater possibility that the US central bank will lower borrowing costs in June and at least two 25-basis-point (bps) rate cuts in 2026. This further undermines the USD and supports the EUR/USD pair. However, the uncertainty over European Central Bank (ECB) President Christine Lagarde’s tenure, along with trade-war fears, could act as a headwind for the shared currency. In fact, The European Parliament’s trade chief stated that the European Union (EU) will propose freezing the ratification process of the trade deal with the US until they’ve received details from the Trump administration on its trade policy.