The EURUSD pair rebounded toward 1.1780 on Friday as the US Dollar began to lose momentum following its brief surge after stronger-than-expected Nonfarm Payrolls (NFP) data. Traders quickly turned their focus back to structural headwinds facing the US economy, notably the passing of President Trump’s tax-and-spending bill and growing signs of trade protectionism.
Despite the upbeat labor data from the US, concerns over long-term fiscal sustainability and inflationary pressures stemming from new tariffs helped cap the Dollar’s advance. These conditions supported the Euro, even in the face of disappointing macro data from Germany and France.
Trump’s Fiscal Plan Fuels Dollar Doubts.
On Thursday, Trump’s ambitious “One Big Beautiful Bill” passed through the House of Representatives. The Congressional Budget Office (CBO) estimates the bill will increase the US federal deficit by $3.3 trillion over the next decade, pushing the current $39.2 trillion debt even higher.
Such projections have rattled bond and currency markets, reviving fears of a long-term debt crisis in the world’s largest economy. Investors increasingly view the fiscal outlook as a major structural weakness for the US Dollar, reinforcing flows into the EURUSD.
Tariff Warning Rekindles Trade War Fears
Trump also announced that he will begin sending letters to trading partners outlining their current tariff structures. This comes just days ahead of the July 9 deadline for a fresh round of reciprocal levies. The threat of renewed trade tensions added to risk aversion and stoked inflation fears, which could complicate the Fed’s monetary policy outlook.
For the EURUSD, these developments are a double-edged sword weighing on global demand but also weakening the Dollar as market participants seek alternatives.
ECB’s Lagarde Keeps the Hawks in Flight
The European Central Bank (ECB) President Christine Lagarde added fuel to the Euro’s recovery after stating in an interview on Friday that the ECB is in “a good position” and remains committed to the 2% inflation target. She signaled no urgency for further rate cuts in July, effectively pushing back on dovish bets.
Her message was clear: the ECB will adopt a wait-and-see approach, confident that inflation is returning to its target range. This contrasts with market expectations that the Fed will eventually need to cut, especially if fiscal excess or trade tensions spark economic headwinds.
Eurozone Macro Data Disappoints: A Drag on Momentum
Despite the ECB’s hawkish stance, recent data from the Eurozone highlights ongoing fragility in the region’s largest economies:
Germany
Factory Orders fell 1.4% MoM in May, missing the forecasted -0.1%.
April had seen a modest 1.6% gain, now reversed by May’s contraction.
Signals that the German industrial base remains under stress amid weak global demand.
France
Industrial Output shrank by 0.5% MoM in May, after a 1.4% decline in April.
Market had expected a modest +0.3% improvement.
Eurozone Services
The HCOB Services PMI was revised higher to 50.5 for June, from a flash estimate of 50.0.
May’s figure was 49.7, meaning the sector has technically returned to expansion.
However, the underlying report warned of weak demand and fragile growth outlook.
These figures collectively paint a picture of stagnation and uneven recovery, which may limit how far the Euro can rally without stronger domestic catalysts.
NFP Surprise Alters Fed Expectations
On Thursday, the US Nonfarm Payrolls report showed a 147,000 increase in jobs in June, far above the 110,000 forecast. The Unemployment Rate also fell to 4.1% from 4.2%.
Additionally, the ISM Services PMI for June came in at 50.8, bouncing back above the 50-mark after May’s contraction reading.
While this initially boosted the US Dollar, the impact was short-lived. The CME FedWatch Tool showed that odds of a July rate cut dropped to 5%, down from 20% before the data. However, longer-term rate cut bets remain intact, especially given weak wage growth and macro uncertainty.
Technical Overview: EURUSD Builds a Bullish Base
The pair is now trading in the upper 1.1700s, showing signs of bottoming out after a brief retreat earlier in the week. Friday’s price action suggests consolidation, but with an underlying bullish tilt supported by fundamental headwinds for the Dollar.
Key Technical Levels:
Resistance: 1.1800 (psychological), 1.1835 (recent high), 1.1870 (multi-week resistance)
Support: 1.1740 (minor), 1.1710 (weekly low), 1.1670 (200-day MA)
RSI: Neutral at 51—room for upside
MACD: Slightly positive crossover forming on 4H charts
A close above 1.1800 would open the door for a potential rally toward the 1.1870-1.1900 zone, especially if next week’s US data disappoints or trade tensions escalate.
Week Ahead: Key Events to Watch
July 9 Tariff Deadline – Heightened risk of retaliation from key trading partners.
Eurozone ZEW Surveys – A pulse check on economic sentiment.
US CPI & PPI – Inflation data that could swing Fed expectations.
ECB Minutes (July 11) – Confirmation of Lagarde’s policy tone.
Conclusion: EURUSD Reclaims Ground Amid Fiscal and Trade Anxiety
The EURUSD pair is showing signs of stabilizing and potentially resuming its uptrend, as fading NFP euphoria gives way to more pressing structural concerns over US fiscal policy and global trade.
The ECB’s measured optimism combined with Trump’s escalating tariff rhetoric and ballooning debt projectionsmakes for a fragile Dollar outlook, which in turn benefits the Euro.
Unless incoming Eurozone data deteriorates further, or the Fed surprises hawkishly, the bias for EURUSD appears skewed to the upside heading into next week.
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 the Euro rising despite weak German and French data?” answer-0=”Because structural concerns about US debt and trade policies are outweighing Eurozone data. In addition, the ECB’s hawkish tone supports the Euro.” image-0=”” headline-1=”h2″ question-1=”Will the ECB cut rates again in July?” answer-1=”Unlikely. Lagarde’s latest remarks suggest the ECB is comfortable with its current rate stance and confident in reaching the 2% inflation goal.” image-1=”” headline-2=”h2″ question-2=”What are markets watching next?” answer-2=”July 9 tariff deadline, US inflation data, and ECB minutes. These events could influence both central bank outlooks and EUR/USD direction.” image-2=”” count=”3″ html=”true” css_class=””]
