-
EUR/USD encounters selling pressure above 1.1400 as the US Dollar strengthens on rising optimism for a swift US-EU bilateral trade deal.
-
European officials have requested domestic companies to submit information regarding US investment proposals.
-
Inflation in France eased in May, raising the likelihood of interest rate cuts in June.
EUR/USD pulled back to around 1.1350 during Tuesday’s European trading session after reaching a monthly high of 1.1425 the previous day. The currency pair came under selling pressure as the US Dollar (USD) strengthened amid progress toward a potential trade deal between the United States (US) and the European Union (EU).
The US Dollar Index (DXY), which measures the Greenback against six major currencies, recovered from earlier losses and climbed 0.4% to about 99.35.According to Reuters, EU officials have requested domestic businesses to submit their US investment plans, signaling a strong push from Europe to accelerate the creation of a trade proposal.
On Monday, European Trade Commissioner Maros Sefcovic posted on X that the EU is committed to speeding up efforts for a trade deal across the Atlantic, helping ease trade tensions. “The EU Commission remains fully committed to constructive efforts at pace towards an EU-US deal. We continue to stay in constant contact,” Sefcovic stated.
The US Dollar experienced sharp declines on Friday and Monday due to mixed signals from Washington on tariff policies against the EU. On Friday, US President Donald Trump proposed 50% tariffs on EU imports but delayed their implementation from June 1 to July 9 following a “good phone call” with European Commission President Ursula von der Leyen, who pledged to advance trade talks quickly while requesting more time to finalize a deal. This development prompted market participants to reassess the US Dollar’s outlook.
Daily Digest Market Movers: EUR/USD Faces Pressure as ECB Officials Signal More Interest Rate Cuts
- EUR/USD came under selling pressure following the release of preliminary May Consumer Price Index (CPI) data for France, which showed a notable easing in inflation. The report indicated a 0.2% monthly decline in prices after a sharp 0.7% rise in April, while the year-on-year CPI growth slowed to 0.6% from April’s 0.9%.
- The softer inflation figures are expected to encourage European Central Bank (ECB) officials to consider further monetary easing. After the data release, ECB policymaker and French central bank governor François Villeroy de Galhau described the 0.6% inflation rate as a “very encouraging sign of disinflation in action” and maintained a dovish outlook on interest rates. “Policy normalization in the Euro area is probably not complete,” he said, according to Reuters.
- Separately, ECB Governing Council member and Lithuania’s central bank governor Gediminas Šimkus warned of downside inflation risks due to a stronger Euro and ongoing US trade tensions, suggesting the possibility of an “interest rate reduction in June.”
- Financial markets have now fully priced in a 25 basis point cut to the ECB’s Deposit Facility Rate, expected to be lowered to 2% at next week’s monetary policy meeting.
- Ahead of the ECB gathering, investors await flash inflation data for May from Germany and its six states, Spain, and Italy on Friday, with broader Eurozone figures due on June 3.
Technical Analysis: EUR/USD Holds Crucial 20-Day EMA Support
EUR/USD retraced from the monthly high of 1.1420 and is currently trading near 1.1350 on Tuesday. Despite the pullback, the near-term outlook remains bullish as the pair continues to hold above the key 20-day Exponential Moving Average (EMA) around 1.1277.
The 14-period Relative Strength Index (RSI) is struggling to surpass the 60.00 level; a break above this threshold could trigger renewed bullish momentum.
On the upside, the major resistance to watch is the April 11 high at 1.1475, while on the downside, the September 25 high of 1.1215 serves as important support for Euro bulls.
