EUR/USD turned lower Monday and the probability of breaking key resistance near 1.1500 may be dwindling as investors wonder whether the ECB might produce a dovish surprise this week.

The fallout from U.S. President Donald Trump's tariffs has included dollar weakness as investors appear to be reconsidering the attractiveness of U.S. assets, contributing to a 13.0% EUR/USD rally from February's low.

The euro also rallied significantly against the yuan, lowering import prices from China. In what may have been a tip to lower prices ECB President Christine Lagarde said Friday the ECB is attentive to the impact of the dollar's depreciation.

Traders must now be attentive to the possibility that lower import costs could help push euro zone inflation closer to or even below the ECB's inflation target, potentially giving the central bank reason to consider exceeding the market's dovish expectation of a 25bps rate cut on Thursday.

Economic growth could also provide reasons for a more dovish ECB. While Germany is expected to boost spending, this will not be felt immediately. Last week German economic institutes downgraded their 2025 GDP forecast to +0.1% from +0.8% in September and the result could be worse if Trump's reciprocal tariffs go into effect.

A dovish ECB outcome could lead EUR/USD to fall sharply, leaving resistance near 1.1500 untouched.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)