The EUR/USD exchange rate has dropped below 1.1600 because the US Dollar is gaining strength. In June, US Retail Sales were better than expected, rising by 0.6% from the previous month. Meanwhile, inflation in the Eurozone remained steady, with the headline Consumer Price Index (CPI) at 2.0% and Core CPI at 2.3%. The Euro continues to decline against the US Dollar due to strong economic data from the US. Good Retail Sales and a robust Manufacturing Index suggest that the Federal Reserve may keep interest rates high, which supports the Dollar and impacts the Euro negatively.

Market Sentiment and Economic Data

During the American session, the EUR/USD traded cautiously around 1.1600. It was at about 1.1586, down 0.50%, as US data led to more selling pressure. Recent US data shows strong consumer spending and a stable job market. Retail Sales for June rose by 0.6% from the previous month, beating expectations and recovering from a 0.9% fall in May. Core Retail Sales also increased by 0.5%. Initial Jobless Claims in the US were 221,000, lower than the predicted 235,000. The Philadelphia Fed Manufacturing Index jumped to 15.9 in July from -4.0 in June, significantly exceeding the forecast of -1, which further boosted the US Dollar. In the Eurozone, inflation data did not favor the Euro. The CPI remained at 2.0% year-on-year, meeting expectations, while Core CPI stayed at 2.3%. This suggests that the European Central Bank may keep interest rates steady as inflation appears stable.

Trade Tensions and Currency Strategies

Tensions over trade between the US and EU continue, with discussions happening in Washington. There are ongoing worries about potential tariff increases, which could pose risks to the Euro, especially for Eurozone exporters. A currency performance table shows how the Euro fared against key currencies, revealing its strongest performance against the Australian Dollar due to daily currency shifts. The heat map for currencies allows for quick evaluations of percentage changes. For example, the Euro compared to the US Dollar shows a decrease of -0.47%. Presently, the EUR/USD trades weakly around 1.07, influenced by the widening policy divergence between the US and European central banks. The European Central Bank cut rates in early June, while the Federal Reserve remains steady. This difference is expected to keep the pair under pressure in the weeks ahead. The Fed’s latest outlook indicates only one potential rate cut in 2024, which strengthens the dollar. While US inflation slightly cooled to 3.3% in May, comments from Powell suggest a “higher for longer” approach to interest rates, supporting a strong dollar through the summer. In Europe, political instability after the unexpected election call in France adds significant risk that weighs heavily on the euro. This uncertainty overshadows the recent rise in Eurozone inflation, which was 2.6% in May. Political risks are a clear challenge for the Euro. Create your live VT Markets account and start trading now.

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