EUR/USD is trading firmly around 1.0850 after recovering from early losses in the European session on Monday (3/10). The major currency pair strengthened as the US Dollar (USD) struggled to gain ground after last week's sharp decline. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, traded vulnerable near a fresh four-month low of 103.50.

The outlook for the US Dollar remains uncertain as investors grow concerned about how US President Donald Trump's 'America first' policies will shape the economy. On Friday, comments from the President in an interview with Fox News suggested that Trump's policies would cause a short-term economic shock.

"There's a transition period because what we're doing is so big," Trump said on "Sunday Morning Futures". The comments came after he was asked about the possibility of a recession.

Recently, a series of US data showed signs of economic slowdown, such as the lowest Consumer Confidence in 15 months, an unexpected decline in ISM Manufacturing New Orders, and slightly lower-than-expected Nonfarm Payrolls (NFP) data for February. The weak data has forced traders to raise bets in favor of the Federal Reserve (Fed) continuing its policy easing cycle at its June meeting. The probability of the Fed cutting interest rates in June has increased to 82% from 54% a month ago, according to the CME FedWatch tool.

Meanwhile, Fed Chair Jerome Powell continues to guide a "wait and see" approach on interest rates due to the lack of clarity on Trump's tariff and tax policies. "Uncertainty about the Trump administration's policies and their economic impacts remains high," Powell said in a statement at an economic forum at the University of Chicago Booth School on Friday, and "the net impact of trade, immigration, fiscal, and regulatory policies is what matters to the economy and monetary policy."(Newsmaker23)

Source: FXstreet