The EUR/USD pair weakened, nearing the 1.0500 level, as the US dollar gained momentum on the back of rising Treasury yields. Investors continued to favor the greenback amid expectations that the Federal Reserve may maintain higher interest rates for longer than previously anticipated.
A jump in US Treasury yields put additional pressure on the euro, as traders assessed the possibility of more Fed tightening. The benchmark 10-year yield climbed above key levels, reinforcing demand for the dollar while diminishing appetite for riskier assets. Market participants remain cautious ahead of upcoming US economic data that could shape future Fed policy moves.
The euro struggled to find support despite a series of economic reports from the Eurozone. Weak German business sentiment and concerns over slowing growth in the region further weighed on the common currency. The European Central Bank (ECB) has signaled a cautious stance on rate cuts, but expectations for prolonged economic weakness have kept the euro under pressure.
Meanwhile, US economic indicators have largely outperformed expectations, boosting confidence in the dollar. Strong labor market data and resilient consumer spending have reinforced the Fed’s case for keeping rates higher. Some Fed officials have also reiterated their stance that inflation remains a concern, suggesting that rate cuts may not come as soon as markets had hoped.
Looking ahead, traders are closely watching upcoming US inflation reports and Fed commentary for further direction. A hotter-than-expected inflation reading could drive yields even higher, pushing EUR/USD closer to the 1.0500 mark or beyond. Conversely, any signs of cooling inflation might provide temporary relief for the euro.
For now, the dollar’s strength continues to dominate, with EUR/USD struggling to gain traction. Unless economic data shifts expectations around monetary policy, the euro may remain vulnerable to further downside pressure.
