The EUR/USD pair slipped to 1.1640 after reaching one-week highs just above 1.1700, influenced by the US Dollar’s rebound. The possible appointment of Christopher Waller as the Federal Reserve Chairman is influencing the market.
Christopher Waller, a Fed Governor appointed by Donald Trump, has become a likely candidate to replace Jerome Powell. Meanwhile, Stephen Miran is considered a favourite for a board seat and might influence upcoming monetary policy decisions.
US Economic Data
US economic data showed an increase in Jobless Claims to 226,000, surpassing expectations. Nonfarm Productivity rose by 2.4%, while Unit Labour Costs were slightly above anticipated levels, both pointing to a need for caution in monetary policy adjustments.
Technical analysis suggests EUR/USD found resistance at 1.1700, trimming gains but aiming for a 0.5% weekly increase. Bulls face challenges between 1.1700-1.1710, while support is anticipated in the 1.1595-1.1610 range.
The Euro, the official currency of 19 EU countries in the Eurozone, remains a key player in global trade. Variations in the Euro’s value are influenced by factors like ECB interest rates, inflation data, and economic indicators, all affecting the currency’s strength.
The EUR/USD has pulled back to around 1.1640, and we see this as a direct result of a strengthening US Dollar. This move is supported by the latest US CPI data for July 2025, which came in at 3.4%, reminding the market that inflation remains a primary concern for the Fed. The pair’s inability to hold gains above the 1.1700 level shows significant resistance is forming.
Potential Impact of US Monetary Policy
The talk of Christopher Waller potentially leading the Federal Reserve is creating a hawkish outlook for US monetary policy. His past statements from his time as a governor suggest a preference for tighter control over inflation, which generally favors a stronger dollar. We remember the market volatility during the 2018 leadership transition, so this uncertainty alone could justify hedging against euro strength.
At the same time, we’re seeing a different story from the European Central Bank, which appears more hesitant to tighten policy. Recent German ZEW economic sentiment figures from July 2025 showed a dip, reflecting ongoing concerns about industrial output in the Eurozone. This policy divergence is a key reason we anticipate further pressure on the EUR/USD exchange rate.
For derivative traders, this suggests positioning for potential further weakness in the EUR/USD. Buying put options with strike prices below the 1.1600 support level could be a way to capitalize on a downward move in the coming weeks. These options offer a defined risk if the pair unexpectedly reverses and moves higher.
We saw a similar dynamic play out back in 2022 when aggressive Fed tightening pushed the EUR/USD below parity for a time. While the recent rise in US Jobless Claims to 226,000 provides some reason for caution, the overriding theme is Fed hawkishness. Therefore, we should be prepared for the dollar to potentially continue its upward trend against the euro through the end of the month.
