The EUR/USD pair remains stable above 1.1550, while the US Dollar Index (DXY) has dipped below 98.00. Wage growth in the Eurozone has slowed, and the Empire State Manufacturing Index fell to -16.0 in June from -9.2 in May, putting additional pressure on the Dollar. As market anxiety eases, EUR/USD has bounced back from a dip tied to geopolitical tensions. The pair has gained about 0.70% daily, trading near 1.1594, just below last week’s high of 1.1631, which was the strongest level since October 2021.

Currency Index Movements

The US Dollar Index, which compares the Dollar to six major currencies, is around 97.75, its lowest in three years. In the Eurozone, wages increased by 3.4% year-on-year, the slowest growth since 2022, giving the European Central Bank (ECB) more flexibility in its policies. Due to ongoing economic uncertainties, the ECB’s Joachim Nagel has taken a cautious approach, hinting at possible rate adjustments due to geopolitical risks. Market attention now shifts to upcoming US retail sales data, the Fed’s policy decisions, Eurozone inflation figures, and comments from ECB officials. The currency heat map shows the Euro has risen 0.46% against the US Dollar today. The EUR/USD pair has firmly held above 1.1550, largely influenced by the US Dollar Index (DXY), now around 97.75, its weakest in nearly three years. This movement is driven by a combination of weak US business indicators and slower wage growth in the Eurozone. The slowdown in wage increases—annual growth of 3.4%—has not been this low since early 2022, impacting expectations about the ECB’s future actions. Recent manufacturing data from the US, especially from New York State, has not helped the Dollar. A significant drop in the Empire State Manufacturing Index to -16.0 from -9.2 shows a decline in production confidence. This situation, along with the weakening DXY, creates a favorable environment for the Euro to gain ground. The EUR/USD’s rise of about 0.70% to 1.1594 reflects solid demand for the Euro, getting closer to the recent high of 1.1631.

Key Data Watch

What’s important now isn’t just the current level but how traders respond to upcoming data. We’re looking ahead to US retail figures and any clear signals from the Federal Reserve. The Fed has kept traders uncertain, and with mixed economic reports, every word from Powell is significant. Increased attention is necessary. On the other side of the Atlantic, traders are analyzing Nagel’s comments, as he remains cautious and warns of external risks. This uncertainty, combined with the decline in wage growth, allows for a gradual approach from the ECB without immediate inflation worries. If Eurozone inflation data reflects this slower trend, the ECB can likely proceed without drastic measures. The heat map shows the Euro’s 0.46% gain against the Dollar aligns with a broader theme of moderate risk recovery. Importantly, this rise results not from a single event but from a combination of factors reducing risks for the Euro, even as upward movement may face resistance near recent highs. From a strategic viewpoint, we should be ready to adjust our sensitivity to data over the next two weeks. While volatility might seem low, it can be misleading during critical moments like the present. Option traders may look to reposition or adjust their strategies, especially in short-term EUR/USD trades. The directional bias leans towards testing 1.1630 again, but only with confirmation from upcoming economic data. Stay open-minded and look for confidence in broader market trends before making trades. The mix of ECB caution and weakening US fundamentals has not fully impacted prices yet, and there’s still potential for that narrative to evolve. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now