The Euro remained under pressure on Wednesday, with the EURUSD pair hovering near fresh weekly lows around 1.1620–1.1640. The latest Eurozone Consumer Price Index (CPI) figures from Eurostat confirmed preliminary estimates, showing that inflation was unchanged in July. Headline CPI rose 2% year-on-year, while core inflation slipped 0.2% on the month but advanced 2.3% annually.
The report underscored the challenge facing the European Central Bank (ECB). Despite inflation holding above the 2% threshold, ECB President Christine Lagarde struck a cautious tone during her remarks at the World Economic Forum in Geneva. She noted that recent trade deals were insufficient to erase economic uncertainty and forecasted softer growth into Q4 2025, even as the Eurozone economy has shown resilience so far this year.
Markets interpreted the ECB’s stance as a signal that policy normalization remains distant, keeping pressure on the Euro against its US counterpart.
US Dollar benefits from safe-haven demand
The US Dollar Index (DXY) advanced modestly as global risk sentiment weakened. Wall Street closed sharply lower on Tuesday, led by the technology sector, amid growing concerns over increased government intervention in corporate activity. Asian markets extended the sell-off, and European equities were expected to open on the back foot.
In this environment, investors have rotated into safe-haven assets, with the US Dollar benefiting the most. The risk-off mood has overshadowed the steady Eurozone inflation data, reinforcing demand for the Dollar and keeping EURUSD on the defensive.
Geopolitical backdrop weighs on Euro
Beyond economic fundamentals, geopolitics have added to the Euro burden. Markets initially welcomed the meeting between US President Donald Trump and Ukrainian President Volodymyr Zelenskyy, interpreting it as a potential breakthrough for peace talks. However, the Kremlin tempered expectations by dismissing the possibility of an imminent meeting between President Vladimir Putin and Zelenskyy.
Instead, Moscow offered to host such a meeting, a proposal that Zelenskyy rejected. This development has cooled optimism over a peace settlement, adding to investor caution and indirectly weighing on the Euro.
Fed Minutes and Jackson Hole in focus
Later in the day, the Federal Reserve’s FOMC Minutes from the July meeting will be released. While they will provide insight into the committee’s divisions over monetary policy, their market impact may be muted. The minutes pre-date the latest string of US inflation and labor market data, which have shifted market expectations more firmly toward a potential rate cut in September.
As such, traders will likely look beyond the minutes and focus instead on Fed Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday. Investors expect Powell to clarify the Fed’s outlook on interest rates and possibly provide hints on whether the central bank is leaning toward a policy shift before year-end.
Market implications for EURUSD
With EURUSD trading near 1.1638, the pair remains vulnerable to further downside if risk aversion persists and Powell maintains a cautious stance at Jackson Hole. The Euro’s inability to find support from inflation data or Lagarde’s comments highlights the currency’s fundamental weakness relative to the Dollar.
If Powell signals a willingness to cut rates in September, EURUSD could find temporary relief. However, a reaffirmation of the Fed’s data-dependent approach may keep the Dollar supported, especially in the current risk-off market environment.
In the near term, 1.1620 remains key support for EURUSD, followed by 1.1580. On the upside, resistance is seen at 1.1680 and 1.1720.
Conclusion
The Euro remains trapped in a bearish setup, weighed down by steady but uninspiring Eurozone inflation, cautious ECB messaging, and renewed geopolitical concerns. Meanwhile, the US Dollar benefits from safe-haven demand and expectations surrounding Fed policy. With investors awaiting Powell’s Jackson Hole speech, EURUSD is likely to remain under pressure, and a decisive break below 1.1620 could open the door to deeper losses.
