Bloomberg: traders expect euro to rise despite trade tensions

Traders are betting that the euro will strengthen over the next month, even with looming tariffs from US President Donald Trump, Bloomberg reports. Risk reversals, a key market indicator, showed on Monday that investors were the most optimistic about the euro since late 2020.

The euro is showing its best start to a year in nine years, having risen more than 4% against the US dollar. Bloomberg notes that markets are anticipating growth in the European economy, partly due to increased defense spending. Furthermore, the United States may experience greater negative impacts from trade disputes than EU countries.

According to Elias Haddad, Senior Strategist at Brown Brothers Harriman, the European Central Bank's (ECB) rate cuts are expected to be less aggressive than previously anticipated. This, in turn, is also expected to support the euro.

Meanwhile, the euro declined 0.2 percent to $1.0781 on Tuesday following reports of potential US tariffs, Bloomberg informed.