EUR/USD hovers above 1.0850 near four-month highs amid concerns over US growth

• EUR/USD remains near its four-month high of 1.0888, reached on Friday. 
• The US Dollar struggles amid worries about a potential slowdown in the US economy. 
• The Euro gained support from Germany's fiscal reforms, with major political parties planning to revise the debt brake.

EUR/USD started the week on a positive note, trading around 1.0860 during Monday's Asian session. The pair's upward movement is largely driven by concerns over a potential slowdown in the United States (US) economy. San Francisco Fed President Mary Daly said late Sunday that rising uncertainty among businesses could dampen demand in the US economy but does not justify a change in interest rates.

On Friday, data from the US Bureau of Labor Statistics (BLS) showed that Nonfarm Payrolls (NFP) increased by 151,000 in February, falling short of the expected 160,000. January's job growth was also revised downward to 125,000 from the previously reported 143,000. The weaker-than-expected labor market data could weigh on the US Dollar (USD), providing a tailwind for the EUR/USD pair.

Meanwhile, US Commerce Secretary Howard Lutnick stated on Sunday that the 25% tariffs, imposed by President Donald Trump in February, on steel and aluminum imports, set to take effect on Wednesday, are unlikely to be postponed, according to Bloomberg. While US steelmakers have urged Trump to maintain the tariffs, businesses reliant on these materials may face increased costs. This could dampen market sentiment, supporting the US Dollar and potentially capping EUR/USD's upside.

The Euro (EUR) found support from Germany's fiscal reforms, as the country's major political parties announced plans to revise the debt brake. The proposed changes aim to increase defense spending and fund a €500 billion infrastructure initiative to stimulate economic growth. Additionally, European leaders agreed to a substantial boost in defense spending to strengthen the continent's military capabilities.

On the monetary policy front, the European Central Bank (ECB) delivered a widely expected 25 basis points (bps) rate cut and acknowledged that policy is becoming less restrictive, hinting at a potential pause in further reductions. Market participants anticipate one or two additional 25bps rate cuts later this year.