The EUR/USD pair is experiencing its tenth consecutive day of gains, trading around the 1.1800 level. This rise comes ahead of speeches at the Sintra meeting in Portugal and the release of US Manufacturing and Job Openings figures.
Euro gains have been driven by an upswing in the Eurozone Manufacturing PMI and positive German Unemployment figures, despite steady inflation. The US Dollar remains weak, affected by worries over US trade policy, fiscal debt concerns, and potential Federal Reserve interest rate cuts.
Impact of Trade News
In trade news, a recent US-China rare earths deal is offset by US frustrations with Japan and threats of increased tariffs. The US fiscal debt, expected to rise by $3.3 trillion due to Trump’s tax bill, contributes to Dollar pressure.
Eurozone manufacturing in June showed slight improvement with the PMI rising to 49.5. German unemployment increased by 11,000, lower than expected, while Eurozone CPI figures confirmed steady inflation, aligning with forecasts.
The ISM Manufacturing PMI is a key indicator of US factory activity, signalling economic trends. JOLTS Job Openings survey measures job vacancies and is used to gauge the employment market. Both indicators are important for economic assessment and currency analysis.
The EUR/USD pair continues to advance, marking a notable run-up that has now lasted for ten consecutive sessions. It’s currently hovering close to the 1.1800 handle, a level not seen in weeks, drawing attention as policymakers gather in Sintra and the US prepares to release two closely watched economic reports. These include factory activity data via the ISM Manufacturing PMI, and insights into the labour market from the JOLTS openings survey.
What we’ve already seen is confirmation that Europe has managed to generate modest improvement in its industrial sector. The PMI reading, while still narrowly below the neutral 50 mark, gave markets enough encouragement to support the common currency. Meanwhile, German joblessness edged higher but did so by far less than anticipated. Inflation in the bloc, on the other hand, held steady – an outcome that, although unsurprising, helped reinforce expectations that the European Central Bank may not need to step up monetary support for now.
The Influence of US Policy
Across the Atlantic, however, the Dollar has faltered. Confidence in US policy has eroded slightly, as market participants digest mixed signals around trade strategy, fresh tariff threats on allies like Japan, and ballooning fiscal projections. Traders are now taking seriously the idea that rate cuts may re-enter the conversation if the data comes in soft. The rare earths arrangement with China attempted to shift focus, but tension remains unresolved and broader trade relations appear strained.
In this kind of setting, timing becomes everything. Any discrepancy between market estimates and forthcoming US data will directly affect not just rate expectations but also volatility in currency and interest rate derivatives. Should the ISM outcome underwhelm, and job openings show contraction, Dollar-negative bets may accelerate. That sort of environment usually supports further appreciation in the Euro, provided there are no fresh geopolitical deterrents.
As we examine what lies ahead, those of us working with derivatives are especially focused on the rate differentials and how they are priced in medium-term instruments. Yield curve positioning will reflect shifting expectations around policy action. The forward-looking nature of these indicators – especially when set against very current data – gives them added relevance. Open interest in shorter-duration contracts has already adjusted to reflect the upward pressure in EUR/USD, but the real test will come once Powell speaks and US economic signals are a matter of record, not speculation.
We’ve been tracking positioning closely. Hedging behaviour now suggests that traders are managing short-Dollar exposure with greater caution as the pair gets closer to a psychologically important level. Options skew, for example, tells us there’s growing appetite to protect against potential pullbacks, but also no clear conviction about when such retrace might begin.
From a tactical standpoint, market participants need to pay deliberate attention to forward rate agreements and the movement in the implied volatility surface, as they’re providing clearer clues than spot moves alone. Keep particular watch on the divergence between short-end Eurozone rates and their US counterparts, where spreads have begun widening again.
Until fresh data alters the narrative, directional bias remains tilted. That said, we’re now entering a period where macro headlines can lead to whip-sawing moves if expectations are not met precisely. This week’s upcoming events don’t just fill the calendar – they have real weight in recalibrating where markets believe the policy paths are heading.
