The EURUSD pair remains depressed near one-month lows on Wednesday, as traders digest stronger-than-expected Eurozone economic growth while remaining cautious ahead of the US Federal Reserve’s highly anticipated policy decision. Despite a mild attempt to recover from five-week lows during the Asian session, the Euro quickly lost momentum near 1.1575 and hovered around the 1.1550 mark in early European trading approximately 2% below its July peak.
The pair is on track for its first monthly loss since December 2024, primarily weighed by growing market concern over the EU-US trade deal’s long-term impact on the Eurozone economy, alongside resilient US economic data keeping the Dollar in demand.
Muted Euro Reaction to Solid Economic Data
While the Eurozone showed signs of resilience, the market’s response has been relatively flat. Preliminary GDP data for Q2 revealed a surprise 0.1% quarterly expansion, better than the market’s expectation for stagnation (0.0%), but significantly below Q1’s 0.6% growth.
On a national level:
Germany’s Q2 GDP contracted by 0.1%, in line with forecasts, indicating weakness in Europe’s largest economy.
German Retail Sales, however, surged 1.0% in June, doubling the market consensus.
France outperformed expectations, with Q2 GDP rising 0.3% versus the expected 0.1%, while consumer spending also jumped 0.6%, a notable beat compared to a forecasted 0.1% decline.
Despite these encouraging data points, the Euro failed to gain traction, suggesting that investors remain more focused on global macro risks and the upcoming Fed signals rather than backward-looking economic prints.
US Dollar in Demand as Traders Await Fed Guidance
The US Dollar remains broadly supported, thanks to solid economic fundamentals and expectations that the Federal Reserve will maintain a cautious tone during its policy decision later today. Although the Fed is widely expected to leave interest rates unchanged, Fed Chair Jerome Powell’s post-decision commentary will be crucial in assessing the likelihood of a potential rate cut in the coming months.
This particular Fed meeting carries heightened importance due to escalating political pressure from US President Donald Trump, who has publicly criticized Powell and demanded rate cuts raising concerns about the Fed’s independence.
Adding to the Dollar’s strength is the anticipated rebound in Q2 US GDP, forecasted to grow 2.4% annualized, a significant turnaround from Q1’s 0.5% contraction. If confirmed, this would further solidify the Fed’s case for maintaining a “higher-for-longer” stance.
Trade Developments and Geopolitical Headlines in Focus
Apart from central bank policy, market sentiment is also shaped by the evolving landscape of global trade. Although recent US-China trade talks in Stockholm ended without a breakthrough, positive comments from Trump hint at a potential extension of the trade truce beyond the August 12 deadline, adding modest optimism to risk assets.
However, the new EU-US trade agreement, while beneficial for US exports, is raising concerns in Europe. Traders fear the deal could undermine European manufacturing competitiveness, placing additional pressure on the Euro in the medium term.
EURUSD Technical Outlook: Bears Maintain Control
Technically, EURUSD remains stuck in a downward channel, with support near 1.1540/1.1500 and resistance around 1.1575/1.1600. The pair needs a decisive break above 1.1600 to initiate any meaningful recovery, while a drop below 1.1500 would open the door toward 1.1440 and 1.1375 next.
Momentum indicators like RSI and MACD remain subdued, supporting the view of range-bound trading with a bearish bias, especially ahead of high-risk US events.
Euro Performance vs Major Currencies (Daily Change)
Base \ Quote USD GBP JPY CAD AUD NZD CHF
EUR -0.04% -0.14% -0.27% 0.10% 0.20% -0.00% -0.06%
The Euro’s biggest gains came against the Australian Dollar, while it underperformed versus the Japanese Yen and Pound Sterling, reflecting a broader theme of investor caution ahead of key risk events.
What to Watch Next
With volatility expected to spike after the Fed announcement and US GDP data, traders should closely monitor:
Jerome Powell’s press conference for any dovish or hawkish shift.
US Q2 GDP growth and any major deviations from the 2.4% forecast.
Further developments in US-China and EU-US trade negotiations.
Upcoming Eurozone inflation data and ECB commentary that could impact the Euro outlook.
Conclusion: EURUSD Awaits Fed Clarity Amid Trade and Growth Crosswinds
The EURUSD pair remains under bearish pressure, trading near one-month lows as traders weigh mixed Eurozone economic signals against a backdrop of rising US strength and political drama around the Federal Reserve. While Eurozone GDP surprised to the upside, the shadow of the EU-US trade pact and cautious investor sentiment keep the Euro pinned. All eyes are now on the Fed’s policy decision and Powell’s guidance, which will likely set the near-term direction for the pair.
Until there is clearer visibility on US rate policy and global trade dynamics, EURUSD expected to stay range-bound with a bearish tilt. A dovish Fed surprise might offer temporary relief to the Euro, but unless European growth shows sustained momentum, Dollar bulls are likely to remain in control.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Always conduct your own research and consult a professional advisor before making investment decisions.
[sc_fs_multi_faq headline-0=”h2″ question-0=”Why is EUR/USD hovering near monthly lows despite strong Eurozone GDP?” answer-0=”Because broader concerns—such as the EU-US trade deal implications and resilient US economic performance—are outweighing modest Eurozone growth surprises.” image-0=”” headline-1=”h2″ question-1=”What will be the key driver for EUR/USD in the near term?” answer-1=”The Federal Reserve’s rate decision and Powell’s tone, along with upcoming US GDP figures, will drive short-term direction.” image-1=”” headline-2=”h2″ question-2=”Has the Fed signaled any rate cuts?” answer-2=”Not explicitly. However, markets will watch Powell’s comments for any hints of dovishness, especially amid political pressure from the White House.” image-2=”” count=”3″ html=”true” css_class=””]
