The euro is showing a sharp rally against the U.S. dollar. The EUR/USD pair has already reached a three-year high and shows no signs of slowing down.

Meanwhile, according to a survey of economists, officials at the European Central Bank are likely to cut borrowing costs several more times, though they are ultimately expected to follow the lead of the U.S. Federal Reserve.

Respondents anticipate consecutive quarter-point rate cuts in April and June, after which the deposit rate is expected to settle at 2%. Economists warn that U.S. trade policy poses significant risks, threatening to undermine eurozone economic growth. Escalating protectionist measures, including the imposition of tariffs and trade restrictions, could severely disrupt supply chains and reduce demand for European goods. Uncertainty in U.S. trade policy is creating instability in financial markets, deterring investors and complicating long-term planning for European businesses. Additionally, aggressive fiscal policies aimed at boosting domestic demand in the U.S. could strengthen the dollar, making European exports less competitive.

A key concern is the erratic attempts by the U.S. president to reshape the global order. His trade war has already roiled financial markets, fueled fears of a major economic collapse, and left world leaders unsure of how to respond.

The temporary truce proposed by Trump yesterday — a 90-day pause — provides time for negotiations, allowing the European Union to delay countermeasures. However, the U.S.-China standoff continues to intensify. The biggest challenge for the ECB in this situation is having to maintain the appearance of being in control in the face of Trump's unpredictability.

Clearly, the ECB is now operating in a radically different environment as U.S. tariffs become a reality, and the eurozone's monetary policy must adapt accordingly. Against this backdrop, the Governing Council is expected to cut rates by another 25 basis points at its April 17 meeting, ahead of a series of cuts likely later this year.

The latest inflation report from the eurozone indicates that rate cuts are not only possible but necessary — if not now, then when? Recent statements from policymakers suggest that many are open to a pause in April, but a significant number also support further easing.

Most survey respondents expect rates to reach neutral territory only by the third quarter of this year. While half of them pegged the neutral rate — one that neither restricts nor stimulates growth — at 2%, nearly as many economists believe it is already above that level.

Technical Outlook on EUR/USD

At present, buyers need to focus on reclaiming the 1.1325 level. Only then can the pair aim for a test of 1.1388. A break above this level could open the path toward 1.1427, although such a move would be difficult without support from major players. The ultimate bullish target would be the 1.1485 high. If the pair declines, I expect strong buyer interest only around the 1.1260 level. If there is no support there, it may be worth waiting for a retest of the 1.1217 low or opening long positions from the 1.1155 level.

Technical Outlook on GBP/USD

Buyers of the pound must reclaim the nearest resistance at 1.3047. Only then can they target 1.3108, which could be a tough level to breach. The final bullish target is the 1.3156 level. If the pair declines, bears will attempt to regain control at 1.2985. A successful break of this range would significantly damage the bullish outlook and push GBP/USD down toward the 1.2929 low, with the potential to reach 1.2866.