EUR/USD Slips Toward 1.1600 Ahead of Key Eurozone Inflation Data

• EUR/USD pulls back to around 1.1620 in early Thursday trade.
• Markets await Eurozone HICP inflation figures and US Retail Sales data.
• Fed expected to hold rates steady in July amid tariff uncertainty.
• Trump hints at possible deal with Europe and new tariff measures on smaller economies.

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The EUR/USD pair retreated during Thursday’s Asian session, dipping toward the 1.1600 mark as investors braced for fresh inflation data out of the Eurozone. The pair is currently hovering near 1.1620, giving back gains from the previous session, as attention turns to the Harmonized Index of Consumer Prices (HICP) and US Retail Sales data, both due later today.

US Dollar Holds Firm as Fed Rate Pause Bets Rise

The US Dollar continues to gain traction, supported by growing expectations that the Federal Reserve will leave interest rates unchanged at its upcoming July policy meeting. Ongoing tariff uncertainty has made the Fed more cautious, with odds favoring a rate hold within the 4.25%–4.50% range.

Comments from Federal Reserve officials added to this sentiment. Dallas Fed President Lorie Logan suggested the central bank is likely to maintain its current stance to keep inflation under control, especially in light of new tariff-related inflation risks. New York Fed President John Williams echoed this, stating the current policy is appropriate while the Fed monitors incoming data.

Trump Comments Stir Market Sentiment

President Donald Trump injected further volatility into the markets with fresh tariff talk and potential geopolitical shifts. He said the US would send a single notice to more than 150 smaller trading nations, informing them of a 10% import tariff, possibly increasing to 15–20%. Trump clarified that these countries are not major trade players like China or Japan.

He also voiced frustration with Fed Chair Jerome Powell, saying he would prefer Powell resign, although removing him could “disrupt the markets.” On a more optimistic note, Trump signaled a possible trade deal with Europe, and mentioned a deal with India was “very close.”

What’s Next for EUR/USD?

The Euro is under pressure as traders look ahead to the Eurozone HICP data, a key indicator of inflation across the bloc. A hotter-than-expected reading could offer the euro some support by strengthening the European Central Bank’s tightening outlook. On the other hand, a soft inflation print may add downside pressure to EUR/USD, especially as the USD remains buoyed by safe-haven demand and hawkish Fed expectations.

Key Levels to Watch:

• Support: 1.1600 psychological level
• Resistance: 1.1650, followed by 1.1700
• Market Drivers Today: Eurozone HICP, US Retail Sales, Fed speakers

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