USD strength builds as EUR/USD loses support ahead of PMIs and IFO
Stronger US data and firmer rate expectations are giving the dollar fresh support just as EUR/USD slips below key levels. With flash PMIs and Germany's IFO survey next up, traders are watching to see whether weaker eurozone data confirm the break and widen the macro gap further.
Market Analyst
US macro resilience is widening the gap with Europe
The latest macro picture continues to favour the dollar. While the US economy has cooled from its earlier pace, it is still showing more resilience than the eurozone, where soft survey data and weak momentum continue to point to a much more fragile backdrop.
That divergence matters for EUR/USD because it keeps reinforcing the idea that the US can tolerate tighter financial conditions more easily than Europe. If incoming business surveys underline that gap again, the euro may struggle to attract enough support to reverse its recent weakness.
Markets are starting to price higher US rates again
The dollar has also found support from the rates market after a run of firmer US inflation and labour-market data. With unemployment still holding around 4.3% and both CPI and PPI surprising to the upside, traders have started to rebuild expectations that the Federal Reserve may need to stay tighter for longer.
According to the source analysis, Fed funds futures are now pricing a 61.13% probability of a 25-basis-point rate increase in 2026, which would lift the policy rate to 4.00%. That repricing has helped US yields push higher and has made the dollar more attractive against lower-yielding peers.
Wider rate differentials are giving the dollar fresh momentum
A firmer US yield backdrop is now feeding directly into the FX market. As the spread between US rates and eurozone rates widens again, the dollar has started to recover momentum and EUR/USD has moved back under pressure.
That shift does not need dramatic risk aversion to keep going. If relative-rate support stays with the dollar, the pair may remain vulnerable even if broader market sentiment stays reasonably steady.
PMIs and IFO could decide whether the EUR/USD break sticks
The next major test for the pair will come from flash PMI releases and Germany's IFO business climate survey. If those numbers confirm another soft patch for the eurozone economy, the recent EUR/USD break below support may start to look more convincing.
A stronger-than-expected set of readings could still help the pair stabilise, but for now the macro balance looks tilted in favour of the dollar. That leaves traders watching closely to see whether the upcoming data validate the move or force a reassessment.
EUR/USD may weaken further as key support breaks
EUR/USD has slipped below support around 1.166, increasing the risk that a double-top pattern is now taking shape. If the break holds, the pair could come under further pressure in the days ahead, although a quick recovery back above the neckline would still leave room for a false-break rebound.
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