The Euro faces extreme pressure at this moment. It has once again weakened against the US Dollar, rendering this one of the most volatile weeks seen by the EUR/USD currency cross. As the final week reports, EUR/USD dropped close to 2.83% during the week. During the American trading session, it is getting ready to consolidate losses around 1.1411. This bearish momentum continues into day six in a row thanks in large part to strong performance by the US Dollar.
As with euro weakness, this has pushed the US Dollar Index (DXY) to a new two-month high near the key 100.00 level. Such strength in the dollar has put the Euro under a lot of pressure, with EUR/USD trading close to seven-week lows. The two stuck around the key 1.1400 support level. It dropped Wednesday to its lowest level since June 11. Forex strategists at a global financial services firm emphasize the eye-catching EUR/USD bearish development. They forecast that it will post its first monthly drop since December 2024.
The Dollar is the most powerful currency in the world. It has shown resiliency in the fact that, compared to other currencies, it recently became the strongest currency compared to the Japanese Yen. This somewhat mixed picture is emblematic of the often contradictory and complicated realities in today’s economic climate.
Recent economic indicators emerging from Germany do nothing to dim that optimism. Germany’s Consumer Price Index (CPI) increased by 0.3% m/m in July, above the consensus of 0.2%. The year-over-year CPI rate holds firm at 2.0%, in line with market expectations. This stability in inflation comes amidst a general market trend driven by positive economic data out of the U.S.
On the US front, positive economic reports show a rise in personal spending and income. Personal spending June rose 0.3% month-over-month, as did personal income, which came in above the expected 0.2% increase. Moreover, continuing claims have dropped to 1.738 million, and initial jobless claims fell to 218,000 for last week, just under the predicted 224,000. These are all encouraging signs that US economic condition is improving, adding fuel to the Dollar’s bullish fire.
The annual Harmonized Index of Consumer Prices (HICP) in the Eurozone has an important effect on currency markets. In fact, just a few days ago it went down a little bit to 1.8%, from 1.9%. This figure is well below the European Central Bank’s (ECB) target of 2%. That’s where the real concern lies, from an inflationary pressure standpoint, in the Eurozone economy.