The euro retreated from its recent highs on Tuesday, with EUR/USD slipping to 1.1350 during European trading hours. This pullback follows a brief rally to a monthly high of 1.1425, fueled by optimism over US-EU trade talks. The US Dollar strengthened as signs emerged of accelerated negotiations, including EU officials’ requests for companies to detail their US investment plans.
A Reuters report indicated that these efforts reflect Europe’s intent to fast-track a trade proposal, a move highlighted by European Trade Commissioner Maros Sefcovic. In a statement posted on X, Sefcovic affirmed, “The EU Commission remains fully committed to constructive efforts at pace towards an EU-US deal. We continue to stay in constant contact.”
Additional factors supporting the dollar include:
- US Dollar Index (DXY) rising 0.4% to near 99.35
- Temporary resolution of tariff tensions following Trump’s delayed tariff plan
President Donald Trump’s proposal for 50% tariffs on EU imports, initially slated for June 1, was postponed to July 9. His decision came after a “good phone call” with European Commission President Ursula von der Leyen, who pledged swift progress on trade talks.
French Inflation Cools, ECB Dovish Outlook Builds
Fresh inflation data from France added weight to expectations of an ECB rate cut in June. The preliminary Consumer Price Index (CPI) for May showed a 0.2% monthly decline, reversing April’s 0.7% rise. On an annual basis, CPI increased by just 0.6%, down from 0.9% in April.
Key developments:
- ECB policymaker François Villeroy de Galhau described the slowdown as “a very encouraging sign of disinflation in action.”
- Lithuania’s central bank head Gediminas Šimkus warned of downside inflation risks and signaled a possible 25-basis point cut in June.
Investors have now largely priced in a rate reduction from 2.25% to 2% at the ECB’s next monetary policy meeting. Meanwhile, traders will closely watch inflation data from Germany, Spain, and Italy on Friday, ahead of broader Eurozone figures on June 3.
Technical Outlook: EUR/USD Holds Support
Despite its retreat, EUR/USD’s technical structure remains bullish. The pair is holding above the 20-day Exponential Moving Average (EMA), currently near 1.1277.
- The 14-period Relative Strength Index (RSI) is hovering below 60, with a breakout above this level likely to invite renewed buying interest.
- Key resistance stands at the April 11 high of 1.1475, while immediate support lies at the September 25 high of 1.1215.
With US-EU trade developments and ECB rate signals shaping sentiment, the coming days are set to test both the euro’s resilience and the dollar’s rebound.