EUR/USD Surges Past 1.1600 as Weak Dollar Drives Gains

The EUR/USD continued its upward momentum on Thursday, breaking above the 1.1600 mark for the first time since late 2021. The rally is being fueled by a combination of renewed tariff threats from former U.S. President Donald Trump, rising expectations of Federal Reserve rate cuts, and hawkish rhetoric from European Central Bank (ECB) officials—all contributing to a weaker U.S. Dollar and a stronger euro.

The Dollar’s brief boost from the U.S.–China trade truce quickly faded after Trump warned on Thursday that he may impose unilateral tariffs on trade partners failing to strike a deal by the July 9 deadline, according to Bloomberg.

Adding to the Dollar’s weakness, Wednesday’s softer-than-expected U.S. Consumer Price Index (CPI) data has strengthened market bets on a potential Fed rate cut in September. Futures data from the CME FedWatch tool now show nearly a 60% probability of a 25-basis-point cut, up from 50% just a week ago.

Meanwhile, ECB policymakers continue to strike a hawkish tone, echoing President Christine Lagarde’s post-meeting stance last week. This growing divergence in monetary policy between the Fed and the ECB is further boosting the euro’s appeal in currency markets.

Daily Market Movers Digest: "Sell America" Sentiment Roars Back

• Market sentiment turned sharply against the U.S. Dollar on Thursday as "Sell America" made a strong comeback. Former President Donald Trump rattled markets early in the day, revealing plans to send letters to trade partners outlining terms for a deal to avoid steeper tariffs ahead of the July 9 deadline.
• The fragile trade truce with China offered little support to the greenback. The U.S. Dollar Index fell to a fresh seven-week low, approaching April’s multi-year trough at 97.95. The euro has been one of the biggest beneficiaries of the dollar's renewed weakness.
• Adding to the dollar’s woes, ECB policymaker Isabel Schnabel earlier reaffirmed the central bank’s tightening bias, noting that the Eurozone’s economic outlook remains "broadly stable" and that inflation is aligning with the 2% target—fueling expectations that the ECB is nearing the end of its hiking cycle.
• Wednesday’s softer-than-expected U.S. inflation data also weighed on the dollar. Headline CPI rose just 0.1% in May (vs. 0.2% expected) and 2.4% year-on-year (vs. 2.5% forecast). Core CPI followed suit, rising only 0.1% month-on-month and holding steady at 2.8% annually, both below market estimates.
• A bright spot came from Wednesday’s 10-year U.S. Treasury bond auction, which drew solid demand, easing near-term fiscal concerns and providing modest support to the dollar.
• Looking ahead, attention shifts to Thursday’s U.S. Producer Price Index (PPI) report, expected to show a 0.2% monthly gain and a 2.6% year-on-year increase. A softer print could reinforce expectations for a Fed rate cut in September.

Technical Outlook: EUR/USD Clears 1.1575, Eyes 1.1600 and Beyond

EUR/USD is accelerating higher after breaking out of its recent consolidation phase. The pair has decisively cleared the late April highs around 1.1570 and is testing the psychological barrier at 1.1600, which coincides with the 261.8% Fibonacci extension of the prior range.

The 4-hour RSI is deep in overbought territory, hinting at a potential pullback. However, in the current bullish backdrop, any dips are likely to attract fresh buyers. Key support levels lie at 1.1495 (June 5 high) and 1.1455 (former range ceiling).

Should the pair break decisively above 1.1600, the next resistance is seen at the 361.8% Fibonacci extension, around 1.1685. However, some consolidation or a mild correction is likely before that level comes into play.