EUR\/USD traded lower near 1.1660 in early Asian trading on Friday, as the US Dollar edged up against the Euro. The move followed firmer US inflation tied to Middle East tensions, which raised expectations that the Federal Reserve may keep rates higher for longer or consider further rises.<\/p>\n
This week\u2019s data showed US PPI inflation rose at its fastest pace since 2022 in April, while CPI increased at its fastest pace since 2023. The data supported a higher-rate outlook and weighed on the pair.<\/p>\n
Markets priced a 36.9% chance of a US rate rise of at least 25 basis points at the December meeting, up from 22.5% a week earlier, according to the CME FedWatch tool. <\/p>\n
Diplomatic developments also drew attention after a meeting between US President Donald Trump and Chinese President Xi Jinping in Beijing. Trump said he wanted US-China ties to be \u201cstronger and better than ever before\u201d, and said Xi offered help on the conflict and pledged not to supply military equipment to Iran, while also supporting reopening the Strait of Hormuz.<\/p>\n
The Euro is used by 20 EU countries and accounted for 31% of all foreign exchange transactions in 2022, with average daily turnover of over $2.2 trillion. EUR\/USD accounts for about 30% of all FX transactions, followed by EUR\/JPY (4%), EUR\/GBP (3%) and EUR\/AUD (2%).<\/p>\n
Looking back to late 2025, we saw the market correctly anticipate the Federal Reserve’s “higher for longer” stance as Middle East tensions fueled inflation. That sentiment ultimately led to the final 25 basis point rate hike in December 2025. Now, the EUR\/USD is trading at a much weaker level, hovering near 1.0550 as policy divergence becomes the dominant theme.<\/p>\n
The key issue for us today is the persistent stickiness in US inflation, which is delaying the start of the Fed’s easing cycle. The latest US CPI data for April 2026 came in hotter than expected at 3.1%, stalling the disinflationary trend we saw earlier in the year. Consequently, fed funds futures have pushed back the odds of a first rate cut from July to September 2026, keeping the US dollar supported.<\/p>\n
Meanwhile, the European Central Bank faces a different problem with a sluggish economy and cooling inflation. The most recent Eurozone HICP registered at 2.2%, and Germany, the bloc’s largest economy, posted a worrying -0.2% GDP contraction in the first quarter of 2026. This growing gap between the Fed’s outlook and the ECB’s likely need to cut rates sooner is putting sustained pressure on the euro.<\/p>\n
For derivative traders, this environment suggests positioning for further euro weakness against the dollar in the coming weeks. Buying EUR\/USD put options with expirations in late June or July offers a clear way to profit from a potential slide towards the 1.0400 level. Implied volatility has been climbing, reflecting the uncertainty, so these positions can also serve as a valuable hedge.<\/p>\n
The risk-on optimism that we briefly saw following the Trump-Xi meeting in 2025 has also largely evaporated. Renewed tensions over trade and technology access are creating a cautious market mood. This backdrop tends to favor the US dollar as a safe-haven asset, adding another headwind for the EUR\/USD pair.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/USD dips to 1.1660 as stronger US inflation boosts dollar, lifts Fed rate-hike odds.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-47268","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/47268","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=47268"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/47268\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=47268"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=47268"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=47268"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}