The euro weakened against other major currencies in the European session on Tuesday, as investors ponder the likely impact of U.S. tariff hikes on inflation, economic growth and corporate profits.

With U.S. tariffs on automobiles, aluminum, and pharmaceuticals expected in the near future, traders may wait to see how the underlying negotiations play out.

Federal Reserve Bank of Atlanta President Raphael Bostic on Monday said he anticipates slower progress on inflation in coming months and therefore sees the Fed cutting its benchmark interest rate only a quarter of a percentage point by the end of this year.

As growth worries mount, investors await a slew of U.S. data through the day, including consumer confidence data for March, February's new home sales figures, the Richmond Federal Reserve's manufacturing index for March, and speeches by Fed Governor Adriana Kugler and New York Fed President John Williams for further direction.

U.S. Q4 GDP data due on March 27 may provide a clearer picture of how the world's largest economy performed in the final stretch of 2024.

In economic news, the Ifo Business Climate indicator for Germany rose to 86.7 in March 2025, marking its highest level since July. Business sentiment improved as companies grew more optimistic about the months ahead (87.7 vs. 85.6 in February), following parliamentary approval of the German government's plans to increase defense spending.

Additionally, firms' assessment of the current business situation improved as well (85.7 vs. 85.0). source: Ifo Institute

The ifo Expectations Index, which reflects Firms' expectations for the next six months, improved less than expected in February. The expectations index rose to 87.7 in March from 85.6 in February. The index was seen at 87.9.

Data from the European Automobile Manufacturers' Association, or ACEA, said, new car sales in Europe dropped by 3.4% on a yearly basis in February, after a 2.6% decline in January.

In the European trading now, the euro fell to nearly a 3-week low of 1.0777 against the U.S. dollar, from an early high of 1.0809. The next possible downside target for the euro is seen around the 1.04 region.

Against the yen, the euro dropped to 162.32 from an early 6-day high of 163.03. On the downside, 156.00 is seen as the next support level for the yen.

Against the Swiss franc and the pound, the euro edged down to 0.9528 and 0.8351 from early highs of 0.9549 and 0.8364, respectively. If the euro extends its downtrend, it is likely to find support around 0.94 against the franc and 0.81 against the pound.

Looking ahead, U.S. S&P/Case-Shiller home price index for January, U.S. Consumer Board's consumer confidence for March, U.S. new home sales data for February and U.S. Richmond Fed Manufacturing index for March are due to be released in the New York session.

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