EUR/USD eased from the previous session's gains, trading near 1.1240 during the Asian session on Monday (5/12). The euro (EUR) faced pressure as European Central Bank (ECB) official Olli Rehn indicated last week that the ECB may consider cutting interest rates at its next meeting—noting that upcoming forecasts confirm a persistent deflationary trend and slowing economic growth.

Nonetheless, the EUR/USD pair gained support from optimism surrounding the US-China trade talks held in Geneva. Both sides reported "substantial progress" after two days of negotiations aimed at defusing the ongoing trade dispute. Chinese Vice Premier He Lifeng called the discussions an "important first step" in stabilizing bilateral relations, while US Treasury Secretary Scott Bessent echoed the sentiment, citing meaningful progress.

Markets now await Washington's response to the European Commission's proposed countermeasures against US tariffs. On Thursday, the Commission launched a public consultation outlining potential tariffs of up to €95 billion on US imports if trade talks fail.

Meanwhile, the US economic outlook remains uncertain. Federal Reserve officials have flagged the risk of stagnation, with Governor Michael Barr warning that higher tariffs could disrupt supply chains—pushing inflation higher while hurting growth and increasing unemployment. Investors remain cautious, as a further escalation in trade tensions could pose serious challenges for the US economy. (Newsmaker23)

Source: FXstreet