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- EUR/USD is caught between weak eurozone sentiment and a data-supported dollar rebound.
- US GDP and core PCE reports may determine whether the dollar regains sustained momentum.
- Political risks in France remain contained—for now—but technical levels in EUR/USD bear watching.
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The EUR/USD fell in the first half of Wednesday’s session, partly in response to fresh data from Germany highlighting falling consumer confidence and as investors continued to digest the turmoil in French politics. But it wasn’t just the euro falling; the US Dollar Index was also bouncing back as investors pondered over Trump’s dismissal of Fed Governor Lisa Cook and figured it might carry more long-term than short-term implications for FX markets.
We also had some decent data yesterday with CB Consumer Confidence, Richmond Manufacturing Index and Durable Goods Orders all coming in above expectations. So, the dollar regained some stability, though the upside momentum should be capped as investors continue to expect two or three rate cuts from the Fed, starting with one next month. The EUR/USD therefore remains neutral to somewhat positive amid an overall bearish dollar trend, with French political risks having limited immediate damage on the single currency.
Dollar Rebounds Ahead of Key US Data: GDP and Core PCE
For now, the strongest support for the US dollar index comes from resilient US data. Yesterday’s solid consumer confidence and durable goods figures have given the greenback a firmer footing. We have some more data coming later this week, which could shape the dollar.
- US Preliminary GDP (Thursday, 28 August – 13:30 BST): The first print for Q2 growth came in at a healthy 3.0% annualised, but that might be flattered by earlier assumptions. Given the recent downward revisions to jobs data, there’s a risk we’ll see GDP marked a little lower in this second estimate. That said, markets tend not to dwell on backward-looking GDP figures unless the revision is meaningful, so expect limited impact unless the numbers spring a real surprise.
- Core PCE Price Index (Friday, 29 August – 13:30 BST): Friday’s release is arguably the one to watch. The Core PCE is the Fed’s preferred inflation gauge, and with CPI softening but PPI running hot, the story seems to be that firms are swallowing tariff costs rather than passing them on. This tug-of-war leaves the Fed in a tricky spot. Policymakers have held off on a rate cut for now, but they’ve all but admitted they’re prepared to move in September if the data keeps leaning that way.
Euro Undermined by Consumer Sentiment Data
This morning, we had some disappointing eurozone data which hurt the EUR/USD pair. The GfK consumer confidence index fell to -23.6 in September, down from a downwardly revised -21.7. Rising concerns about job losses are making consumers increasingly cautious, especially regarding major purchases, further dimming prospects for a meaningful recovery in sentiment this year.
This comes on the heels of German business sentiment data released yesterday, which climbed to its highest level in over a year. Earlier in the week, figures also revealed that the German economy contracted by 0.3% in the second quarter, as US tariffs weighed on exports.
Meanwhile, the single currency continues to live under the shadow of French politics. While French equities remain under pressure, the euro has not weakened much in response to the situation. The spread between French OATs and German Bunds has widened but even here the market reaction so far has been restrained. With the crucial confidence vote set for 8 September, investors are holding fire for now.
Technical Analysis: EUR/USD Key Levels To Watch
All told, the EUR/USD looks relatively steady in the near term, as the pair consolidates inside a triangle-like pattern on the daily chart. With the dollar supported by data but capped by policy expectations, and the euro weighed down by French politics but not yet in crisis mode, the pair seems poised to consolidate. We see EUR/USD holding around 1.15-1.16 and gradually working its way back toward 1.18 as markets refocus on fundamentals later this week, particularly GDP revisions and the July core PCE numbers. If and when 1.18 breaks, the focus will then turn to the next psychologically important 1.20 handle next. However, if the EUR/USD posts a daily close below 1.15 handle now, then this will be a bearish technical development.
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