The euro rose for a seventh straight session on Tuesday, with EUR/USD trading near 1.1790, up around 0.30%, as the US dollar slipped to a six‑week low. The move was initially driven by softer oil prices and hopes of renewed talks between Washington and Tehran, which improved risk appetite and supported energy‑importing economies in the Eurozone.
However, stronger‑than‑expected US economic data and firmer guidance from the Federal Reserve later in the day began to undermine the case for further euro strength and rapid US rate cuts.
Us retail sales surprise on the upside
The latest challenge to the euro’s advance came from US Advance Retail Sales data for March, which rose 0.7% versus expectations of 0.3%. Monthly spending reached $709.6 billion, a sign that US consumer demand remains robust.
The data reinforced the view that the US economy retains more underlying momentum than many had assumed, tempering expectations that the Federal Reserve will move quickly to cut interest rates.
Inflation and labor data point to resilient US backdrop
Earlier, US Producer Price Index (PPI) figures had painted a mixed inflation picture. Annual PPI for March rose to 4.0% from 3.4% in February, but came in below the 4.6% consensus. Core PPI remained unchanged at 3.8% year‑on‑year.
Labor indicators also showed ongoing strength. The four‑week average of the ADP Employment Change increased to 39,250 from 26,000, underscoring a labor market that remains resilient and complicating the Fed’s path toward its 2% inflation target.
Fed officials push back on near‑term rate‑cut hopes
Federal Reserve Chair Jerome Powell signaled a more cautious stance on easing. Speaking at a forum, he said recent data had not given policymakers “greater confidence” in the disinflation process and suggested it will likely take longer than previously thought to reach 2% inflation. He emphasized that restrictive policy needs more time to work, indicating a higher bar for rate cuts.
Other Fed officials offered differing scenarios. Goolsbee suggested rate cuts might still be on the table through 2027 if higher oil prices slow progress toward the inflation goal. In contrast, Miran argued that the 2% target could be reached within a year without additional upward pressure from energy costs.
Market pricing from Prime Market Terminal shows reduced expectations of any rate cuts this year, with traders increasingly assuming that the Fed will keep its current policy stance unchanged.
Shifting geopolitical backdrop and oil prices
Earlier in the week, reports that US officials could resume discussions with Iran had improved risk sentiment and contributed to a weaker dollar. A previous slide in energy prices had also supported the euro, given the Eurozone’s status as a net importer of crude oil and natural gas.
That dynamic is now under strain. De‑escalation hopes have faded as new reports suggest positions between Washington and Tehran are hardening. Oil has responded: West Texas Intermediate crude climbed 1.2% to $86.45 a barrel in early trading, reversing part of the earlier disinflationary impulse that had benefited the common currency.
Ecb flags caution amid geopolitical risks
On the European side, European Central Bank President Christine Lagarde said the ECB stands ready to respond to evolving geopolitical and economic developments linked to the Iranian situation. She stressed it is still too early to draw firm conclusions about the potential impact on the Eurozone outlook.
Traders remain focused on how any renewed upward pressure on energy prices could affect Eurozone growth and the ECB’s room to maneuver on monetary policy.
Upcoming data and central bank signals
The near‑term agenda is busy on both sides of the Atlantic:
- In the US, the Federal Reserve’s Beige Book and speeches from several policymakers are due on Wednesday, offering further insight into regional economic conditions and policy thinking.
- In the Eurozone, February industrial production figures and comments from ECB members are expected, which may refine expectations for the bank’s policy path.
These releases are likely to shape whether the euro’s latest advance can extend or whether the dollar begins to regain lost ground.
Technical picture: bullish structure faces key test
From a technical perspective, EUR/USD maintains a bullish near‑term bias:
- The pair trades above key simple moving averages clustered near 1.1673.
- Price action remains supported by a rising trend line originating from the 1.1411 level.
- The Relative Strength Index stands at 64.8, indicating firm positive momentum but approaching overbought territory.
Resistance is seen near the descending line from 1.1929. Initial support lies around the recent breakout zone close to current prices, followed by the grouped moving averages around 1.1673. The broader upward structure is expected to hold as long as the trend‑line support from 1.1411 remains intact.
For short‑term participants, the 1.1673 region has emerged as a critical level to watch. A clear break below this area would undermine the recent bullish pattern and signal that upside momentum has been exhausted in light of stronger US data and shifting policy expectations.
Weekly performance: euro outperforms the dollar
On a weekly basis, the euro has advanced against most major counterparts:
- Up 1.02% versus the US dollar
- Up 0.27% versus the pound
- Up 0.43% versus the yen
- Slightly weaker against the Swiss franc, down 0.18%
The outperformance against the dollar has been the most pronounced, while moves against other major currencies have been more modest.
Narrative under review as data and geopolitics shift
The euro’s seven‑day rally was built on the expectation that a cooling US economy, lower energy prices, and easing geopolitical tensions would favor the European bloc and lessen the appeal of the dollar.
That storyline is now being questioned. Stronger US retail sales, sticky inflation components, and firm labor data have cast doubt on imminent Fed easing. At the same time, renewed geopolitical frictions are pushing oil prices higher again, challenging one of the core supports for the euro.
As these developments unfold, the recent advance in EUR/USD appears more vulnerable, and traders are increasingly alert to the risk of consolidation or a possible correction if the dollar continues to find support from stronger domestic data and a more patient Federal Reserve.
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