EUR/USD Bounces Back as Trump’s Fed Threats and Soft US PPI Weaken Dollar

The EUR/USD pair staged a recovery on July 16, 2025, climbing 0.25% to 1.1633 after rebounding from a three-week low of 1.1562. The euro’s advance was fueled by a faltering US Dollar, which faced renewed selling pressure following President Donald Trump’s hints at removing Federal Reserve Chairman Jerome Powell, coupled with softer-than-expected US Producer Price Index (PPI) data. Although Trump later tempered his remarks, his criticism of Powell’s delayed rate cuts and the Fed’s broader policies rattled markets, amplifying uncertainty.

US economic data added to the dollar’s woes. June’s PPI rose 2.3% year-over-year, down from 2.6% and below forecasts of 2.5%, while core PPI softened to 2.6% from 3.0%, missing estimates of 2.7%. Despite cooling producer inflation, consumer prices are edging toward 3%, well above the Federal Reserve’s 2% target. The Fed’s latest Beige Book reported a slight increase in economic activity from late May to early July but highlighted a neutral-to-pessimistic outlook, with employment growth limited and rising costs due to tariffs. Markets are pricing in a 95% chance the Fed will hold rates steady at its July 30 meeting, with only 46 basis points of cuts expected by year-end.

In the Eurozone, the data calendar was quiet, but attention is turning to June’s Harmonized Index of Consumer Prices (HICP), set for release ahead of the European Central Bank’s (ECB) July 24 meeting. ECB policymakers appear divided, with some advocating for a rate cut due to growth risks, while others argue for holding steady pending more data. Trump’s recent letter to the EU, signaling potential trade tensions, has raised concerns about a gloomier ECB outlook, though markets expect rates to remain unchanged for now.

Technically, EUR/USD remains fragile but shows signs of an upward bias. To confirm a bullish trend, the pair needs a daily close above the 20-day Simple Moving Average (SMA) at 1.1681, potentially targeting 1.1700, followed by the July 20 high of 1.1749 and the record high of 1.1829. A drop below 1.1600, however, could see the pair test the day’s low of 1.1562, with further downside risking the 50-day SMA at 1.1482 and the 100-day SMA at 1.1254. As markets await key US Retail Sales and Eurozone inflation data, the interplay of Fed policy uncertainty and ECB deliberations will keep EUR/USD traders on edge.