The EUR/USD currency pair dropped to 1.1640 after reaching a week-long high above 1.1700. This decline was driven by a rebound in the US Dollar. Additionally, the potential selection of Christopher Waller as the Federal Reserve Chairman is affecting market sentiments. Christopher Waller is a Federal Reserve Governor who was appointed by Donald Trump. He is a strong contender to take over from Jerome Powell. Meanwhile, Stephen Miran is a favorite for a board position, which could impact future monetary policy choices.

US Economic Data

Recent US economic figures showed that Jobless Claims rose to 226,000, exceeding expectations. Nonfarm Productivity increased by 2.4%, and Unit Labour Costs also dipped slightly over what was expected, suggesting caution is needed for monetary policy changes. Technical analysis indicates that the EUR/USD pair faced resistance at 1.1700, causing it to lose some gains while still aiming for a 0.5% increase this week. Bulls face challenges in the 1.1700-1.1710 range, while we expect support around 1.1595-1.1610. The Euro is the official currency for 19 countries in the Eurozone and plays a significant role in global trade. Its value changes based on many factors, including ECB interest rates, inflation data, and other economic indicators. Now, the EUR/USD has retreated to about 1.1640, largely due to the stronger US Dollar. This shift follows the latest US Consumer Price Index (CPI) data from July 2025, which showed an inflation rate of 3.4%. This serves as a reminder that inflation remains a major concern for the Fed. The pair’s struggle to maintain gains above 1.1700 suggests strong resistance is forming.

Potential Impact of US Monetary Policy

The discussion about Christopher Waller potentially leading the Federal Reserve is creating a cautious outlook for US monetary policy. His previous statements indicate he prefers stricter inflation control, which typically supports a stronger dollar. The market remembers the volatility during the 2018 leadership change, meaning this uncertainty might lead to hedging against euro strength. On the other hand, the European Central Bank seems more reluctant to tighten its policies. Recent German ZEW economic sentiment data from July 2025 showed a decline, indicating ongoing worries about industrial output in the Eurozone. This divergence in policy is a key reason we foresee further pressure on the EUR/USD exchange rate. For derivative traders, this suggests preparing for a possible decrease in the EUR/USD. Buying put options below the 1.1600 support level could be a strategy to benefit from a downward trend in the upcoming weeks. These options provide defined risk in case the pair unexpectedly rallies. We witnessed a similar pattern in 2022 when aggressive Fed tightening drove the EUR/USD below parity for a moment. While the recent rise in Jobless Claims to 226,000 raises some caution, the main narrative continues to emphasize Fed hawkishness. Thus, we should be ready for the dollar to maintain its upward momentum against the euro until the end of the month. Create your live VT Markets account and start trading now.

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