Euro Dips as Markets Await Central Bank Cues

Key points

• EURUSD slips 0.1% to $1.1756 ahead of key eurozone PMI releases and the ECB’s rate decision
• Traders eye comments on euro strength and future rate guidance amid reported EU–US tariff deal

The euro retreated slightly on Wednesday, cooling from a two-and-a-half-week high after traders turned cautious ahead of pivotal eurozone data and the European Central Bank’s policy announcement.

EURUSD edged down 0.1% to $1.1756 following a brief overnight rally to $1.1780, according to LSEG data.

Markets are bracing for a flood of purchasing managers’ index (PMI) figures, with French data due at 0715 GMT, followed by Germany at 0730 and the wider eurozone at 0800.

The ECB will then take centre stage at 1215 GMT, where it’s widely expected to keep rates on hold. The key focus will be forward guidance, particularly whether the central bank addresses the euro’s recent strength, which could impact exports and inflation expectations.

Adding to the pressure, The Wall Street Journal reported Wednesday that the EU and U.S. are in talks over a trade agreement involving a 15% tariff concession, fueling speculation around renewed transatlantic tensions that could weigh on the shared currency.

Technical Analysis

EURUSD carved out a steady uptrend from its 1.17037 low, with price action pushing to a session high of 1.17801 before sellers re-entered. However, momentum has stalled.

Picture: Bullish steam runs out as EURUSD slips below 1.1770, as seen on the VT Markets app

The MACD histogram is fading and a bearish crossover suggests short-term exhaustion from bulls, while the 5- and 10-period moving averages are starting to slope downward.

With price now hugging support just above 1.17550, a break below this zone could open a move back toward the previous low near 1.1700. For buyers to regain control, a strong reclaim above 1.1780 is needed with bullish follow-through.

Cautious Forecast

The euro’s uptrend faces headwinds in the form of cautious monetary policy messaging and geopolitical trade noise. If the ECB signals concern over the euro’s appreciation or remains vague about future hikes, downside risk could materialise.

Conversely, any hawkish tilt or strong PMI prints could revive bullish momentum. Until then, expect choppy consolidation between 1.1720 and 1.1780.

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