The euro was trading around 1.1350 on Friday, just below the peak of 1.15 reached earlier this month, its highest level since 2021, as concerns over the independence of the Federal Reserve eased slightly.

The dollar regained ground after President Trump said he had no intention of sacking Fed Chairman Jerome Powell. Despite this, the euro has gained over 5% against the dollar since the beginning of April, as investors increasingly question the dollar's dominance of the global financial system and turn to the single currency as an alternative.

Expectations of increased defense spending, particularly in Germany, also provided additional support.

On the policy front, the ECB lowered its deposit rate by 25 bp to 2.25%, as expected, its lowest level since early 2023. The central bank also removed language describing its policy as "restrictive", while warning that the economic outlook has worsened due to escalating trade tensions. Markets are now counting on two or three further 25bp rate cuts by the end of the year.